China Trims Steel Capacity Amid Glut, Minister Says

By Bloomberg News

Dec. 21 (Bloomberg) -- China, the world’s top steelmaker, closed 16.9 million metric tons of obsolete capacity this year as part of an effort to ease domestic oversupply, according to Li Yizhong, minister of industry and information technology.

The nation also shuttered 21.1 million tons of iron-making capacity; 800,000 tons of aluminum capacity; and 74 million tons of cement capacity, Li said today at a conference in remarks broadcast on the Internet. The figures beat targets set by the Ministry of Environmental Protection earlier this year.

China, also the world’s biggest producer of iron, cement and aluminum, is facing a severe oversupply of steel as mills expand faster than outdated plants are closed. The government is studying a “more feasible” plan to tackle steel overcapacity, Li’s ministry said on Dec. 3.

“The 2 percent cut in capacity by the Chinese steel industry is truly a spit in the ocean,” Michelle Applebaum, who runs a steel-research firm in Highland Park, Illinois, wrote in an e-mail. “Many of the country’s high-cost and polluting, older provincial mills continue to run for jobs rather than profitability,” said the analyst at Michelle Applebaum Research.

Steel capacity in China may have reached 700 million tons or more, Xiong Bilin, deputy director at the National Development and Reform Commission’s industry department, said on Dec. 3. The nation may need 549 million tons of the alloy this year, the China Iron and Steel Association said in November.

“Investment has risen too fast in some industries in recent years,” Minister Li said today in the Web cast. “There are blind expansions in steel and cement. A large amount of obsolete capacity needs to be closed.”

China had planned to shut 6 million tons of steel-making capacity and 10 million tons of iron-making capacity this year, the Ministry of Environmental Protection said on Jan. 13. The Ministry of Environmental Protection said on Nov. 13 that the government is planning measures to close plants in the steel, aluminum, coke, cement, paper and utility industries.

--Helen Yuan. Editors: Jake Lloyd-Smith, Richard Dobson

To contact the Bloomberg News Staff on this story: Helen Yuan in Shanghai at hyuan@bloomberg.net