China’s cutback in production won’t affect steel glut

10 February 2016

Reports that China, the world’s largest steel producer, plans to reduce its steelmaking capacity by 100 million to 150 million metric tons within five years would hardly make a dent in addressing the global steel glut, the head of a U.S. industry group said Tuesday.

American Iron and Steel Institute president and CEO Thomas J. Gibson told reporters that although he has not seen Chinese government statements regarding the plan, he has read press reports and was not impressed.

“It’s not ambitious enough to get to the core of the problem,” Mr. Gibson said during a conference call.

U.S. steel producers and government officials blame excess global steelmaking capacity for their current woes, saying the glut has depressed prices and resulted in a wave of cheap imports that are tormenting the U.S. industry.

Mr. Gibson said domestic steelmakers announced over 12,000 layoffs last year and operated below 70 percent of capacity for most of the fourth quarter.

Imports of finished steel products captured a record 29 percent of the U.S. market last year, up from 28 percent in 2014, he said.

Mr. Gibson estimated annual global steel supply exceeds demand by about 700 million metric tons, with China accounting for about 425 million metric tons of the excess.

By comparison, U.S. mills shipped about 78.5 million metric tons of steel last year, according to Mr. Gibson.

He noted that three of China’s biggest producers are nearing completion of projects that will expand their capacity by about 50 million metric tons. China has eliminated about 90 million metric tons of capacity in recent years while at the same time bringing about 180 million metric tons of new output on line, he said.

Whatever China plans to do, “The reductions need to be net reductions,” Mr. Gibson said.