China steel capacity rises in 2016, despite closures

13 February 2017

China's steel capacity actually rose in 2016 after the country's high-profile closure program concentrated on already idled plants, environment group Greenpeace said on Monday.

China announced early last year that it would shut down as much as 150 million tonnes of annual crude steel production capacity over the next five years to tackle a price-sapping glut in the sector.

But in research conducted jointly with Custeel, a consultancy affiliated with the China Iron and Steel Association (CISA), Greenpeace estimated there was a net capacity increase of 36.5 million tonnes in 2016.

While a total of 85 million tonnes of annual capacity was shut in 2016, exceeding the national target, the majority was already idled, with only 23 million tonnes still actually in operation.

And, even though last year's plan banned all new projects, Greenpeace said 12 million tonnes of new capacity went into operation.

Furthermore, the group estimated another 49 million tonnes of steel production was restarted over 2016 in response to a recovery in prices.

Greenpeace also said 80 percent of the net increase in capacity took place in the heavily-polluted regions surrounding the capital Beijing, including Hebei province.

Hebei, China's biggest steel producing region, aims to cut total capacity to less than 200 million tonnes by the end of the decade, down from 286 million tonnes in 2013.

The province has promised to close 60 million tonnes of "outdated" capacity from 2014 to the end of this year as part of its pledges to improve air quality.

China's total steel capacity stood at 1.1 billion tonnes last year, according to official figures, lower than some previous estimates but still representing a surplus of around 300 million tonnes.

Xu Shaoshi, the head of the National Development and Reform Commission, China's economic planner, told reporters last month that China would aim to shut another 45 million tonnes of steel capacity in 2017.