China to ban construction of steel production facilities
China has unveiled a new action plan for the steel industry, which includes a set of measures to address the chronic problem of oversupply. This is happening against the background of Beijing's intensified efforts to end a number of price wars raging in the economy, writes the South China Morning Post.
The plan, which includes a strict ban on the commissioning of additional capacities and measures to accelerate the decommissioning of obsolete equipment, could set an example for other industries suffering from overproduction and excessive competition.
The document, published by the Ministry of Industry and Information Technology together with a number of other departments on Monday, calls for strict control over steel production capacities and volumes. It stresses that "coordinated efforts on both supply and demand issues" are needed to stabilize the industry.
The plan aims to "accelerate the transition from old to new growth drivers, develop new productive forces, and further enhance the sustainability and security of industrial and supply chains." The steel industry should aim to increase value added by about 4% annually over the next two years and complete the modernization of more than 80% of steel production facilities to achieve ultra-low emissions by the end of this year.
Although Chinese steel companies account for more than half of global production, the average profitability of listed companies in 2024 was minus 0.26% due to structural problems in the industry, the report says.
According to CINDA Securities, in the first half of September, the country produced 7.44 million tons of five main types of steel products, which is about 5.8% more than in the same period a year earlier. Steel reserves increased by 12.1% to 11.01 million tons, while consumption decreased by about 4.6% to 8.5 million tons.
The composite steel price index is currently at 3507 yuan ($493) per ton, which is about 2.6% higher than last year's figure, but about 14% less than in 2023.
In 2024, China reduced steel production by 1.7% to 1.005 billion tons.