By Amy Lv and Lewis Jackson
BEIJING (Reuters) – China will restructure its giant steel industry through output cuts, although it did not announce any target in its most recent intervention to address overcapacity in the sector, which is sparking world trade frictions.
The world’s largest steelmaker and consumer will “promote restructuring of the steel industry through output reduction”, according to an official report on Wednesday.
“We will introduce policies and measures for resolving structural problems in key industries and end the phenomenon of rat-race competition through industrial regulation and upgrading,” the report said.
China did not say how large output cuts would be, but prices of steelmaking ingredients have been falling in the past week amid speculation Beijing would cut about 50 million metric tons of crude steel output.
China’s state planner and state-backed China Iron and Steel Association did not respond to Reuters’ requests for comment.
“Looking through the Two Sessions during 2019-2024, it’s the first time the National Development and Reform Commission (NDRC) proposes to cut steel production in its draft plans,” Citi analysts said in a note.
“Previously, it focused on industrial transformation, carbon emission, and industry consolidation within the space.”
Analysts and traders told Reuters they were taken by surprise to see clear guidance for the steel industry in such a government report.
“This is a clear signal delivered by the government that it will regulate the steel production this year,” said Xu Xiangchun, director of content at consultancy Mysteel.
Chinese steelmakers have been grappling with generating profits as a prolonged property downturn has hit domestic steel consumption and as mounting trade frictions against cheap Chinese steel products have cast a shadow on its steel exports outlook this year.
China’s robust steel exports, which have partly offset faltering home demand, have triggered complaints from an increasing number of countries and regions, arguing that the flood of cheap Chinese steel has hut local manufacturers.
Vietnam and South Korea, China’s top two steel export destinations among others, announced in February the imposition of anti-dumping duties on some Chinese steel products.
Beijing ordered an end to crude steel output growth in 2021 as part of a plan to limit carbon emissions.
Following the decision, China’s steel output has fallen by 5.6% to 1.005 billion tons last year from the peak of 1.065 billion tons in 2020, official data showed.
(Reporting by Amy Lv and Lewis Jackson in Beijing; Editing by Himani Sarkar, Michael Perry and Sonia Cheema)
