Mills should not rely too much on the Belt and Road initiative: expert
Cutting steel capacity is important but controlling output is more important, as steel exports in 2016 are highly likely to fall as governments in foreign markets move to protect their own domestic producers, China Iron and Steel Association (CISA) Secretary-General Liu Zhenjiang was quoted as saying by Reuters on Saturday.
In 2015, crude steel production in China stood at 804 million tons, down 2.3 percent year-on-year, the first decline in three decades, data from the CISA showed in February.
Domestic consumption was 700 million tons, decreasing 5.4 percent year-on-year.
But a surge in exports last year and the previous year has caused concern and raised flags in some countries, with trade protectionism on the rise and the global environment for steel exports deteriorating, Liu was quoted as saying by Reuters on Saturday.
There are buyers in other markets who use steel products from China for their low prices and good quality, Wang Guoqing, research director at the Beijing Lange Steel Information Research Center, told the Global Times on Sunday.
Wang and other experts said steel producers should not put too much stock in the China-initiated Belt and Road initiative, which aims to boost infrastructure and connectivity among a number of countries and regions to revive the former glory of the Silk Road.
"The initiative is a long-term development program. The demand for steel will be generated project by project, and over a relatively long period of time, so steel mills should not rely too much on the initiative's ability to absorb steel supply glut," Wang noted.
Liu's comments came as Britain asked China on the same day to speed up the process of tackling steel industry overcapacity, in an effort to stem the flood of cheap imports into Europe.
India-based Tata Steel has blamed these shipments for its decision to pull out of the UK, putting 15,000 jobs at risk, media reports have said.
Tata Steel, an Indian multinational steel company, said on March 30 that the company was set to sell its British business for several reasons, including a global oversupply of steel and continued weakness in domestic demand for the product, according to a statement on the company's website.
The Reuters report Saturday said that China's plans to shut steel mills over the next five years will cut capacity to an estimated 1.13 billion tons by 2020 - but that will still exceed domestic demand.
Weakened domestic demand has prompted Chinese steel mills to look at the global market. China's steel exports rose 50.5 percent year-on-year in 2014 and increased by another 19.9 percent in 2015 to reach 112 million tons, according to a speech by Liu published on the website of the CISA on Thursday.
The EU opened three anti-dumping investigations into Chinese steel products in February and imposed new duties on imports after the European steel industry said thousands of jobs were at stake.
Chinese steel mills lost a total of 100 billion yuan ($15.47 billion) in 2015, according to Liu.
Wu Chenhui, an independent analyst, told the Global Times Sunday that domestic steel mills are expected to gain from any rise in steel prices, which he said have bottomed.
