A surge in Chinese steel production and a flood of exports are pressuring world-wide steel prices despite Beijing’s efforts to rein in the steel industry, in the latest example of the global impact of China‘s massive industrial overcapacity.
Global steel prices have fallen 3.5% since February to an average of $710 a ton, according to MEPS steel consultancy. While China hasn’t been shipping much more directly to the U.S., much of its material is destined for the world’s largest economy via trans-shipments through Japan, South Korea, Singapore or Malaysia.
China has an annual capacity surplus of around 160 million tonnes, about a sixth of the industry’s size, analysts say. The China Iron and Steel Association acknowledged in January that efforts to curb capacity expansion haven’t been effective, blaming smaller mills for the binge. It said oversupply is likely to keep plaguing the steel sector.
The Chinese government has been under rising pressure to control steel output since toxic smog triggered a public outcry early this year. China’s Ministry of Industry and Information Technology in January vowed to step up the pace of mergers in polluting industries including steel.