What Is The Extent Of Overproduction In The Chinese Steel Industry?

January 6th, 2017 by Trefis Team
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China is the world’s largest producer of steel, accounting for around half of the world’s production of the commodity. However, China’s steel production comfortably exceeds its domestic demand for the commodity. Chinese steel production continues to remain at elevated levels, despite subdued steel prices and weak domestic demand amid slowing economic growth in the country. We estimate that Chinese steel production exceeded domestic demand by 140 million metric tons in 2016. In other words, excess steel production equates to roughly 21% of domestic demand.

Excess Steel Production 2016

State support in forms such as subsidies and tax breaks has allowed Chinese steel producers to continue producing at elevated levels despite an unfavorable business environment. [1] Excess steel production has driven up Chinese steel exports, which have adversely impacted steel industries worldwide. Chinese steel exports have been characterized by unfair trade practices and regulatory authorities in the U.S. and Europe have imposed antidumping duties on steel imports from China. [2] [3] An increasingly hostile international trade environment could force China to lower its steel production going forward.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for ArcelorMittal

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Notes:
  1. Chinese Steel Subsidies Detailed by Trade Organizations; No Easy Overproduction Fix, Metal Miner [↩]
  2. US issues final antidumping duties for hot-rolled coil steel from seven nations, Platts [↩]
  3. EU Imposes Fresh Anti-Dumping Tariffs on Chinese Steel, Wall Street Journal [↩]