Posted on 19 Feb 2016
China’s plan to cut its annual crude steel capacity by about 13 percent by 2020 will not be enough to revive an industry reeling under a slowdown in the world’s second-biggest economy, a top official at India’s third-biggest producer said.
“There’s excess surplus, so they have to cut production,” Seshagiri Rao, joint managing director of JSW Steel Ltd and chief financial officer for the group, said in an interview in Mumbai.
“Almost every country has taken one step or the other to close its borders, but the import threat continues,” he said.
China earlier this month published a plan on its State Council’s Web site to trim the size of its annual crude steel capacity by as much as 150 million tones by 2020, or about 13 percent of existing capacity, which the China Iron & Steel Association estimates at 1.2 billion tonnes.
China’s output, which accounts for about half the world’s production, fell last year for the first time since 1981.
“The production cuts announced may not have any impact unless we see an actual drop every month,” said Goutam Chakraborty, an analyst at Mumbai-based brokerage Emkay Global Financial Services.
“Ultimately, if China wants to export, they will. India is a big market and demand is actually growing,” Chakraborty said.
India’s consumption rose 3 percent in the past financial year and demand is estimated to grow at between 4 percent and 5 percent annually, Rao said.
While China’s overseas shipments dropped last month from December last year, the relief may be short-lived as the decline might have been the result of slowing production before the Lunar New Year holidays, when manufacturing typically eases, according to the Shenzhen-based Shenhua Futures Brokerage Co (神華期貨經紀有限公司).
