China to focus on improving steel capacity structure

China’s steel industry will shift its focus to optimising capacity structure, including products, location and ownership, in 2019, from reducing overall capacity.

China is entering the fourth year of its supply-side reform push to streamline its bloated heavy industry and to pursue “high-quality development” from “fast-speed development.”

Since 2016, the world’s largest steel maker has eliminated nearly 300 million tonnes of outdated steel production capacity and low-grade steel capacity, but around 908 million tonnes still remains.

“(China’s steel industry) is still far from accomplishing the supply-side reform task,” said Yu Yong, the chairman of China Iron and Steel Association at an annual industry meeting. “(A) major campaign in 2019 will be optimising production structure, adjusting layout of steel mills and pushing merger and acquisition.”

But he also acknowledged that the pressure of oversupply from illegally-added capacity and new projects remains as mills try to cash in on high profit margins.

“Main source of China’s economic growth has turned to consumption from investment, which leads to fewer demand for steel products and higher requirement of products quality,” said Yu.

The China Metallurgical Industry Planning and Research Institute, a government consultancy, predicted last month that steel consumption in the country would fall to 800 million tonnes in 2019 from 820 million tonnes in 2018, because of waning demand in the property, automobile and energy sectors.

China’s car sales fell 2.8 percent in 2018 from the previous year, the first annual decline in 28 years.

Yu also called on steel mills to prepare for further Sino-U.S. trade friction and to pay close attention to the indirect impacts on Chinese steel exports.

Total steel exports fell to 69.54 million tonnes last year, the lowest since 2013, data from the General Administration of Customs showed on Monday.