Monday, March 03, 2014

China Bans New Steel Industry Projects

To alleviate oversupply in the blown up steel sector, China has decided to ban new steel sector projects for the next 4 years. Overcapacity has been a cause of concern for China‚Äôs steel industry for some years, causing huge losses at highly indebted mills, wasting resources and compelling steel mills to depend on government subsidies.

The Chinese government has put additional capacity creation under firm controls and the amount of further capacity will be extremely small. China has about 300 million tons of surplus steel capacity, which is equivalent to roughly double the total output of the European Union last year. Even then, mills have continued to expand and added ~70 million tonnes of new steel production capacity in 2013.

As part of a plan to clean up the environment and deal with steelmaking overcapacity, the Chinese government will also close ~90 million tonnes of obsolete steel mill capacity in the Northern provinces by 2017.

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