Cuts in China capacity aid recovery
Recent global steel price gains have been caused by stronger demand, an increase in iron ore prices and capacity cuts, a Chinese official noted Thursday.
"The current round of global steel price increase is a result of both domestic and international factors," Shen Danyang, spokesman of the Ministry of Commerce (MOFCOM), told a press conference in Beijing. "China is making unprecedented efforts to reduce excess steel capacity."
Media reports have said that China will cut about 150 million tons of steel capacity in the next five years, and that's the major factor causing the rise of steel prices in the world market.
The average global steel price rose from $305 per ton at the beginning of the year to $365 per ton in April, media reports said.
With the recovery of the global economy, steel demand is rising, while a higher iron ore price is also driving up the cost of steel products, noted Shen.
Meanwhile, some domestic infrastructure projects started construction, leading to intensified need for steel, Wang Jianfu, assistant to the general manager at Shanghai-based consulting firm Steelhome, told the Global Times Thursday.
The global steel market will be strongly affected by China's market as the nation's steel production accounted for almost half of the world total in 2015, said Zhou Shijian, an expert at Tsinghua University.
"The surging housing price in first-tier cities in the first quarter this year is driving more investment into the domestic property sector, and that in turn is raising steel demand," Zhou told the Global Times on Thursday.
However, as oversupply in the steel sector persists, prices won't stay high long and will ease by October, Zhou forecast.
Overcapacity is a global issue that requires joint efforts to address, Wang said, noting that China's steel capacity cuts will be good for the global steel sector.
China began to cut steel overcapacity from 2013 and preliminary results were seen by the end of 2015 - about 90 million tons of capacity has been cut, Zhou noted.
"If relevant countries and regions could play a responsible role to reduce capacity and increase demand as China has done, it would be possible for the global steel industry to get out of its difficult situation," Shen noted.
