But not before exporting its overcapacity problem.
China’s central planners are coming around to a painful truth: It’s not gonna be selling as much steel next year.
According to a report from the China Metallurgical Industry Planning and Research Institute released Monday, steel production will shrink next year. Its president told Bloomberg that "Exports will have a hard time growing or even matching this year’s level because of trade disputes and softening demand in many markets."
Yes, there’s too much steel out there. Yet these mills, which produce the lion’s share of the steel out there, aren’t slowing down. Why?
Lots of reasons, points out Bloomberg. But, according to commodities analysts who visited some of them, it’s just not easy to close a mill in China:
… We have constantly heard that local governments simply wouldn’t allow steel mills to be closed down for the sake of local employment and fiscal income. … It was also emphasized that mills are concerned about losing market shares and having to spend fresh capital to resume operation if they stop producing now.
No doubt, it will be interesting to see how China handles its transition toward an economy driven by consumption.
But while the head honchos finally pull the trigger on that long-overdue turn, Chinese steelmakers – many backed by generous government subsidies – have been staving off reality by unloading all of the steel the market didn’t ask for at ridiculously cheap prices. In doing so, it has contributed to layoffs at mills around the world.
Talk about exporting your own problems!