BEIJING (Scrap Monster): The Chinese administration announced its plans to cut as much as 80 million tonnes of excess steel capacity in an attempt to alleviate the massive supply glut situation. Of late, surplus production by Chinese steel mills had pulled the sector into deep crisis.

 

According to Luo Tiejun, Raw Materials Department, Ministry of Industry and Information Technology (MIIT), a new action plan outlining several measures to restructure the country’s steel sector would be published before June this year. The draft plan aims to cut the number of steel enterprises in the country from 500 to 300 over the three year period ending 2017. Last week, the Chinese Industry Ministry had announced its plans to put 60% of the total steel capacity of its top ten steel enterprises under control.

 

China now has production capacities of around 300 million tonnes per annum. The country has failed to contain production over the past several years. Conversely, encouragement by provincial government to set up more plants and boost production at existing facilities added to country’s steel surplus. Industry experts are of the view that the country’s steel sector now faces its worst crisis, mainly on account of slowing economic growth. Long term changes in steel consumption patterns have also affected the steel sector, they noted.

 

All-China Chamber of Commerce for Small and Medium-Sized Metallurgical Enterprises noted that the problems are likely to worsen by 2018. Overcapacity worries will hit the sector the most by that time. The steel production is likely to peak by 2019 and will drop thereafter, it noted.