Report: China’s Steel Cuts in 2016 Were Fake, Capacity Actually Went Up

by Jeff Yoders on FEBRUARY 13, 2017

China announced last year it had implemented ambitious cuts in steel capacity. Now, a new report says that not only did those cuts not happen, but China actually increased steel production capacity.

But a new report by Greenpeace East Asia and Chinese consultancy Custeel says that number was largely smog and mirrors. Many of the plants China says it closed down were already idle, while production was restarted elsewhere and brand new plants opened.

China, which accounts for half the world’s steel production, has a total capacity of 1.1 billion metric tons ): It announced plans to eliminate 100-150 mt of annual production over the next five years.

Last year, it said it had far exceeded its initial target to cut capacity by 45 million mt, which China said its steel sector exceeded, recording total 2016 cuts of around 85 mmt.

But the Geenpeace/Custeel report said that 73% of the announced cuts in capacity were already idle — in other words the plants were not operating. Only 23 mmt of cut capacity involved shutting down production plants that were operating.

At the same time, some 54 mmt of capacity were restarted, and 12 mmt of new operating capacity came online.

That left China showing a net increase in operating capacity of 36.5 mmt last year, a figure that is consistent with a 3% increase in steel production in the second half of last year.

Such an increase is consistent with evidence of a deterioration in the air quality in Beijing in the second half of last year — the steel industry is a heavy consumer of coal and contributor to air pollution, and most of the restarted capacity came in the industrial provinces near the capital, Shanxi, Hebei and Tianjin.