Posted on 04 Mar 2019
China has exceeded its crude steel capacity reduction target for 2018 by around 17pc.
Steel mills eliminated 35mn t/yr of capacity last year against a target of 30mn t/yr, according to the government's 2018 work report, which will be presented at an annual conference of lawmakers in Beijing on Tuesday.
Beijing had earlier indicated it may opt for a steel capacity reduction target of around 20mn t/yr for 2019, although it had achieved its 13th five-year economic plan, 2016-20 steel capacity reduction target of 150mn t/yr in 2018 itself.
Steel capacity reduction since 2016 has partly contributed to rise in steel prices and profitability. But with most redundant capacity already eliminated, Beijing may focus on capacity replacement projects, mergers and acquisitions of smaller mills and shutdowns of chronically loss-making "zombie" mills over the next few years to bring its steel sector in line with its capacity and emissions control objectives.
China's lawmakers will begin their 10-day annual conference on 5 March, during which key policy directions, such as the quantum of special bonds issuance for infrastructure projects, tax cuts and policies on the real estate industry may be announced.
There is an expectation that policies supportive of economic growth will also be announced during the conference, which will last until 15 March. This, along with raised hopes of the US and China reaching a trade deal soon, has lifted iron ore and rebar futures.
The most active May iron ore contract on the Dalian commodity exchange traded higher by 2.75pc during the afternoon session, while the most active rebar contract rose by 1.62pc.
