China increased its steelmaking capacity last year by more than twice Britain's
annual output, a report said today, despite repeated pledges to cut huge excess in the
sector.
China makes more than half the world's steel but a slowdown in its economy and sagging
global demand has left the industry with massive excess capacity.
It has been accused of dumping its production on world markets, depressing prices and
violating international trade agreements.
Throughout 2016, authorities vowed to tackle excess production through consolidation and
shutting idle or inefficient factories.
But while some steel capacity was cut, this was more than offset by China's opening of new
factories or restarting of idle plants, according to a report by steel consultancy Custeel and
Greenpeace East Asia.
It said China's operating steelmaking capacity increased by 36.5 million tonnes in 2016
more than twice as much as the total production capacity of Britain.
Eighty per cent of this increase occurred in three provinces bordering Beijing, causing air pollution to spike in the capital at the end of the
year and early 2017, it added.
Steelmaking is the country's second largest emitter of air pollution, the report said.
Nearly threequarters of plants affected by China's capacity cuts in 2016 were already idle.
Instead of shutting down firms, local officials manoeuvred to "shield zombie steel mills and minimise the impact of the policies" on cutting
capacity, said Lauri Myllyvirta, Greenpeace global coal campaigner.
Despite an agreement for Beijing to address steel overcapacity reached at September's G20 meeting in Hangzhou, China's trade partners
have accused it of dumping the metal on markets in violation of trade rules.
Earlier this month the US Department of Commerce imposed hefty tariffs on certain Chinese steel imports, with duties ranging from 63 per
cent to 190 per cent on Chinese exporters accused of selling their products at below fair value or of being unfairly subsidised.
In January the European Union unveiled taxes of between 30.7 per cent and 64.9 per cent on certain Chinese steel products as it seeks to
protect struggling steelmakers in Europe.
China must target cuts on operating steel factories and not on idle ones, the Custeel report said, noting that more than 20 million tonnes of
new capacity is already due to come online.
Factories should be demolished and not sealed up to prevent their reopening in the future, it said.
Source: ET