Overcapacity is expected to linger for a while, says an official with China’s industry ministry.
Good news for people who like bad news: China has no solid plans to cut back its massive steel overcapacity! That’s bad for the American steel industry; while the Chinese government slowly works out the structural problems in its planned economy, U.S. steelworkers are being forced to compete with the excess steel China’s state-owned mills are dumping into the global market. The Financial Times is on it:
Luo Tiejun, an official with China's industry ministry, said at a conference that planned cuts would reduce annual steel capacity to about 1.1 billion tonnes by 2020 while domestic consumption was unlikely to exceed 700 million tonnes.
"We need to cut [an additional] 200 million tonnes for the situation to become acceptable," Mr Luo said, noting that China also currently exported about 100m tones of steel annually.
Just got to cut 200 million tons of annual steel capacity! No biggie!
China is the world’s largest steel producer, and its massive steel overcapacity has created problems around the globe. It’s already contributed to layoffs in the United Kingdom’s steel industry, and it’s been cited among the reasons for thousands layoffs in the United States dating back to last year.
Here’s what Mario Longhi, CEO of US Steel, had to say about it.
Beijing’s recently announced efforts to tackle its overcapacity problem in steel and other heavy industries were welcome, (Longhi) said, and appeared to be genuine. But he said he still had concerns that Chinese producers might simply replace outmoded plants and their capacity with newer more efficient plants. Or that it would take too long to push through any changes.
“I’m sure that there is something going on. But it not only may be too little but when it happens it may be too late. Because you can’t wait five years. For us we can’t wait that long,” he said.
You know what we shouldn’t do? Reward the Chinese government with a World Trade Organization designation of “market economy status” that will make it easier for it to cheat at trade.