Chinese government considers steel capacity ceiling

Bloomberg and Reuters are reporting the National Development and Reform Commission of China is preparing to order steelmakers to cap their 2023 output with their 2022 production figures as the ceiling.

In the first two months of this year, China’s mills have produced 5.6 percent more steel compared with January and February of 2022. That volume figure was reported by the China Iron and Steel Association (CISA) to the Brussels-based World Steel Association (Worldsteel).

As it has for the past several years, China currently is producing about half of all the steel being made globally. This February, the estimated 80.1 million metric tons produced in China represented 56.4 percent of the steel made in the 63 countries that report to Worldsteel.

Earlier this year, the Steel Committee of the Paris-based Organisation for Economic Co-operation and Development (OECD) referred to China when it released a statement pointing to a “further increase in global steel excess capacity” as one of several problems facing the sector globally.

The OECD Steel Committee, which met in mid-March, said sluggish economic conditions in China, which it said makes about 47 percent of the world’s steel, were a concern, “particularly given the current market slowdown from an ailing real estate sector and possible steel demand declines in the coming years.”

That same committee also referred to producers in China as having a larger carbon footprint compared with steelmakers in many other nations.

Regarding decarbonization and state support for steel production, the OECD Steel Committee said its members had “agreed to strengthen their work on the impacts of market-distorting subsidies and other government support on excess capacity, trade and the viability of the steel industry while encouraging decarbonization of the steel sector under conditions of fair competition.”

In the United States ferrous scrap market, a ceiling on Chinese steel production likely would have minimal impact on processors or brokers. In the first 10 months of 2022, according to U.S. Commerce Department statistics, 193,000 metric tons of ferrous scrap was shipped from the U.S. to China or Hong Kong.

That puts China well behind larger buyers from nations including Turkey, Mexico, Bangladesh, India, Taiwan, Vietnam, Peru, Malaysia, Canada, South Korea, Pakistan and even Greece.

In terms of finished and semi-finished steel imported by the U.S., the Washington-based American Iron and Steel Institute (AISI) has China far down the list of countries sending steel from overseas to the U.S.

In a list of countries that exported the most steel to the U.S. this February, neighboring Canada and Mexico top that list (at more than 380,000 tons each), followed by Brazil, China and South Korea. China ranks no higher than 10^th on the incomplete list published by AISI, at 53,000 tons directly shipped that month.