China's Steel Output Hits New Highs

Whether it's capacity cuts, pollution controls, government closures, economic troubles or tariffs on exports, nothing seems to stop China's mills from producing more steel.

Despite a three-year campaign to slash excess production capacity and government curbs to fight smog, the country's steelmakers have continued to set monthly records for output.

In July, China's crude steel production rose 7.2 percent from a year earlier to 81.24 million metric tons, making it the third month in a row over the 80-million ton mark, according to the National Bureau of Statistics.

So far this year, production is running 6.3 percent ahead of the 2017 record rate, a pace that would put output on track to top 884 million tons in 2018.

Last year, China accounted for 49.2 percent of global steel manufacturing, the World Steel Association said. In figures compiled through May, China's share of the reported world total reached 50.7 percent.

At the 2017 rate, China made more steel in a month than the United States made in a year.

Chinese steelmakers' records this year have been all the more remarkable in light of the forces lined up against them.

Most notably, the industry has been pressured to shut down old production lines since January 2016, when Premier Li Keqiang promised to shed 100 million to 150 million tons of surplus capacity by 2020. The excess was blamed for low prices, losses and overproduction.

Since then, the government has claimed closures of 65 million tons of annual capacity in 2016 and 50 million tons last year with a target of 30 million tons in 2018.

The NBS cited China's production capacity in 2016 as 1.1269 billion tons, the Peterson Institute for International Economics reported. The figures suggest overcapacity could be down to 163 million tons by the end of this year if production continues at the current rate.

Aside from the targets for permanent downsizing, the government has imposed seasonal suspensions to keep coal-fired steel plants from adding to winter smog in the Beijing area during the heating season.

Judging by the series of monthly records, the seasonal curbs of up to 50 percent of normal production did nothing to slow industry output as activity shifted to other parts of the country, even though some cutbacks were extended into the spring.

"The reason we didn't see declines in steel output amid the environmental crackdown is that steel mills have improved their production efficiency by using higher grades of iron ore and adding more scrap steel to churn out more products," analyst Wang Yilin at Sinosteel Futures.

Another reason for increases is that steelmakers rushed to take advantage of rising prices after the market reacted to the capacity cuts, the seasonal suspensions and fears of a wider environmental crackdown.