China still fighting severe steel oversupply
Print Edition
CHINA still faces severe steel oversupply and a recent price surge is only due to temporary market expectations, the country’s top economic planner said yesterday.
“Overcapacity in the steel industry hasn’t been corrected fundamentally,” Zhao Chenxin, spokesman for the National Development and Reform Commission, said at a news conference.
China is determined to reduce the overcapacity in the steel industry, Zhao said.
Corrections in the steel industry will be pushed so that steel companies suffering from overcapacity will be forced to close.
New measures can be expected in the following months but Zhao did not elaborate.
Steel prices increased significantly starting in March and declined mildly in May, as surging property sales pushed up steel demand.
The price increase also followed resumed construction after winter leave and rebuilding of inventory by trading companies, Zhao said.
He said the government’s de-stocking moves reduce steel supply, which partly explains the price surge.
“The price surge is mainly due to expectations of more policy tightening and other short-run factors. Severe steel glut has not been fundamentally reversed,” he added.
Steelmakers have been in deep water over the past few years as a result of shrinking demand and excessive capacity built up during decades of rapid expansion.
The country’s steel mills were “in severe winter” last year as overcapacity and tumbling steel prices squeezed profit margins. The government launched a nationwide campaign to cut overcapacity and upgrade production to battle economic headwinds.
Zhao said the price surge will only mildly disturb the de-stocking efforts, and the price increase will be short-lived.
The NDRC also said China insists that carbon dioxide emissions per unit of its gross domestic product to be cut by up to 45 percent by 2020 and that non-fossil fuels should take up 15 percent of primary energy sources.
By 2020, China intends to cut emissions of carbon dioxide per unit of GDP by 40-45 percent from 2005 level, Zhao said.
In April, the NDRC invested 6.7 billion yuan (US$1 billion) in two energy projects to optimize energy consumption and treat air pollution. A project was approved last month to transmit 1.2 million kilowatt-hours of wind-generated electricity to north China.
The NDRC will cooperate with Myanmar on clean-tech facilities and solar energy systems. China will also share its expertise on climate change via a training program to be provided to developing countries this year.
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