Can China meet its target to cut steel overcapacity?

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22 March 2016

Can China meet its target to cut steel overcapacity?

Report summary

To tackle its chronic steel overcapacity problem, China is taking its toughest stance ever by aiming to cut about 100-150 Mtpa capacity by 2020. In this Insight, we evaluate the potential measures the Chinese government can take, discuss major challenges it will face, and assess how successful these measures will be in meeting this target.

Table of contents

  • Executive summary
  • The size of China's steel overcapacity problem
  • The closure target and its impacts
    • Avoiding financial risk, particularly for private lending and trusts
    • Softening the blow of massive job losses
    • Handling SOE and private steel companies fairly
    • Reducing local government resistance to capacity closure
  • Conclusion

Tables and charts

This report includes 5 images and tables including:

  • Overcapacity calculated assuming a normal utilisation rate of 85%
  • Margin will not significantly improve after 150 Mtpa closure
  • Market forces at work: lower margins lead to more closures
  • Massive financial liability when mills are shut down (CISA members, RMB billions)
  • Net profit margins of CISA members (majority SOEs) and private steel companies

What's included

This report contains:

  • Document

    Can China meet its target to cut steel overcapacity?

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