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September 1, 2016

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Baosteel expects drop in China’s steel use in 2016

BAOSHAN Iron & Steel, China’s top listed steelmaker, expects the country’s apparent consumption of crude steel to drop to 680 million tons this year from 698 million tons in 2015, Dai Zhihao, its general manager, told an online briefing.

The forecast from Baoshan Iron & Steel, or Baosteel, comes at a time when China, the world’s top producer of the alloy, is boosting efforts to slash a huge overcapacity that has boosted cheap exports amid slowing demand at home.

China has promised to slash steel capacity by 45 million tons this year.

Dai said Baosteel’s parent company, China’s No. 2 steel producer, the Shanghai-based Baosteel Group, would cut 12.2 million tons of capacity through 2018, in line with Beijing’s efforts to curb oversupply in China’s steel sector. It had previously planned to reduce 9.2 million tons of capacity.

Overcapacity in China’s steel sector has created trade tensions, with India, Australia and the United States imposing duties on Chinese steel exports amid allegations of dumping.

US regulators have also launched a probe into complaints from United States Steel Corp that Chinese steelmakers, including Baosteel Group, stole its secrets and fixed prices.

Dai cautioned that the outcome of this probe would have a big impact on Chinese steel exports to the US.

The listed unit, Baosteel, expects to ship out more than 3.4 million tons of steel products this year.

The company recently reported higher profits for the six months to June, aided by cost-cutting measures.

Baosteel has previously said it was restructuring, together with Wuhan Steel, amid wide expectations the two firms will be merged.

Dai declined to disclose the latest progress, but said China’s steel sector would require mergers and acquisitions to increase the share of top mills which might take two decades.

In the short term, Dai expects steel prices to get a boost from a seasonal recovery in demand after the summer and China’s crackdown on the sector’s overcapacity.

Shanghai rebar prices fell to their lowest in almost a month yesterday on worries about demand, but for the year the market is still up about 43 percent.


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