overcapacity and oversupply in China, the worlds largest
steelmaker, remained the most pressing challenge for the sector
in 2013, with the gap between supply and demand still
steel output could total 782 million tonnes in 2013, based on a
production volume of 715 million tonnes for the first 11
months, Zhang Changfu, vice chairman and secretary general of
the China Iron and Steel Association (Cisa), said at a recent
conference in Shanghai. This is up 8 percent from final 2012
crude steel output of 724 million tonnes.
But actual crude steel
output is likely to be much higher, as many small unlicensed
mills arent included in data from the National Bureau of
Statistics (NBS), Zhang said.
crude steel consumption will reach 730 million tonnes in 2013,
based on an 11-month total of 668 million tonnes, he forecast.
This is up from 632 million tonnes in 2012.
At the start of this
year, the industry body predicted that 2013 steel demand in
China would grow 3.1 percent vs. 2.5 percent in 2012.
But the growth rate in
demand is quite slow compared with the estimated annual growth
of 8 to 9 percent in output, market observers said.
With Beijing targeting
steady economic growth, large-scale incentives to boost steel
demand were absent in 2013.
market was in a downtrend for most of the year, with prices
falling sharply since the start of the year. A decline in
output due to stricter environmental inspection helped prices
to resume an upward trend in early November, and since then
they have been hovering around 3,500 yuan ($572) per tonne with
As a result,
Chinas steelmakers have continued to struggle for
Between January and
November, the industry reached a profit of only 4.2 yuan (70
cents) per tonne of steelmaking, according to Cisa data.
Capacity control in
China has been a hot topic since the start of the year, with
the government renewing efforts to reduce pollution from heavy
industry due to the poor air quality in major cities.
Council outlined a string of measures to curb air pollution in
mid-June. Any projects that fail the governments
environmental impact assessment will be denied access to land
and bank loans.
steelmaking hub of Hebei province aims to cut 60 million tonnes
of steel capacity by the end of 2017.
In mid-October, the
State Council released guidelines on tackling overcapacity in
five industries, including steel. Some 15 million tonnes of
annual iron production capacity and 15 million tonnes of steel
capacity are required to be phased out by the end of 2015. This
is in addition to the countrys earlier target for 2011-15
of 48 million tonnes for steel and iron production,
Beijing also urged
greater consolidation in major steelmaking provinces, including
Shandong, Hebei, Liaoning, Jiangsu, Shanxi and Jiangxi, aiming
to cut more than 80 million tonnes of steel capacity in those
regions over the next five years.
However, most market
participants believe the efforts fall far short of whats
needed to effectively tackle Chinas overcapacity
With Chinas existing crude steel capacity at more than
1 billion tonnes, there is still a long way to go, they
A version of this
article was first published by AMM sister publication Steel