Tuesday

01-04-2025 Vol 19

Chinese Steel Producers Begin Output Reductions in Response to National Directives

Steel makers in China’s Xinjiang region have begun reducing production, following a national directive aimed at managing overcapacity in the sector. Starting Monday, multiple companies, including Xinjiang Ba Yi Iron and Steel Co, a subsidiary of the world’s largest steel producer, China Baowu Steel Group, have announced a 10% cut in daily crude steel output. Reports from local media and consultancy firms confirmed these reductions. Although Xinjiang represents only 1.3% of China’s overall crude steel production in 2024, analysts view these cuts as indicative of the effectiveness of Beijing’s efforts to alleviate oversupply issues.

The persistent overcapacity has negatively affected steel prices, contributing to weak domestic demand and encouraging a surge in exports that have led to increased trade tensions. On the Shanghai Futures Exchange, steel benchmarks showed positive movement following the news of the cuts. Specifically, rebar saw a rise of 1.23%, hot-rolled coil increased by approximately 1.28%, and wire rod climbed by 1.44%. During China’s recent parliamentary sessions, the National Development and Reform Commission (NDRC) signaled its commitment to curtail steel production but provided limited specifics on implementation.

At a recent industry event, Jiang Wei, the secretary general of the China Iron and Steel Association, advocated for restrictions on new capacity additions to further support these initiatives. This approach aligns with China’s broader strategy announced in 2021 to achieve zero annual growth in crude steel production to combat carbon emissions. As a result, steel production in China, the world leader in output, experienced a decline of 5.6% last year, falling from a peak of 1.065 billion tons in 2020 to 1.005 billion tons in 2021.

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