Positive impact on industry already emerging as prices rise
China eliminated 42.4 million tons of steel capacity and 97 million tons of coal capacity between January and May, the National Development and Reform Commission (NDRC) said Thursday.
The reduced steel capacity accounted for 84.8 percent of this year's goal, while that of coal accounted for 65 percent of the target, Meng Wei, spokeswoman of the NDRC, said at a regular briefing.
Substandard steel output has been eliminated in the country, said Meng. The NDRC said in May that all substandard steel facilities in China would be closed by June 30.
"China [now] has less pressure to achieve the target to cut 50 million tons of steel in 2017," Wang Guoqing, research director at the Beijing Lange Steel Information Research Center, told the Global Times on Thursday.
The commitment to phase out substandard steel products has raised expectations of more steel capacity cuts, said Wang, adding that this is helping to lift steel prices.
The most-traded rebar on the Shanghai Futures Exchange closed up 113 yuan (.6) at 3,111 yuan a ton on Thursday, the strongest since May 31. The most-traded iron ore on the Dalian Commodity Exchange increased 0.6 percent to 423 yuan a ton. Rebar and iron ore are important indicators of steel prices.
China vowed to cut steel production capacity by around 50 million tons and coal by at least 150 million tons in 2017. Last year, more than 65 million tons of steel capacity and more than 290 million tons of coal capacity were eliminated, exceeding the government's annual targets.
Capacity cuts benefit the steel industry, which is already feeling a positive impact, said Wang. Member companies of the China Iron and Steel Association earned 32.9 billion yuan in profits in the first four months of 2017, compared with a year-earlier loss of 1.1 billion yuan, data from the association showed.
The NDRC plans to invest 700 million yuan in Public-Private Partnership (PPP) projects in 2017, said Meng, with 650 million yuan already allocated.
The PPP projects cover sectors such as transportation and water conservation, which are the types of projects that create demand for steel products, noted Wang.