Illegal induction furnace closures bring upside to China steel outlook

Induction furnaces and the steel they produce have been illegal in China since 2000. However, they still exist on a large scale. The ongoing endeavours to tackle overcapacity have revealed the extent of the problem, and China is attempting to eliminate this capacity with more practical measures, particularly at provincial government level. The demand for steel previously met by illegal induction furnaces will have to turn to legitimate blast furnace producers, which provides significant upside to our steel price outlook. However, the positive impact on iron ore and coking coal demand is minimal as more scrap availability may partly offset the increased demand from blast furnaces.