China's Ministry of Industry and Information Technology has lately issued an urgent notification on curbing the excessive growth in steel production, urging commercial banks to reduce or stop lending money to steel producers that have expanded their steel production capacities regardless of market demand.
Meanwhile, speaking on the same issue, China Iron and Steel Association (CISA) secretary general Shan Shanghua has said the CISA is calling for disciplined production cuts to be made by steel producers to their outputs of HRC, CRC, medium plate, and some other steel varieties. Meanwhile, the CISA is also working with the China Chamber of Commerce of Metals, Minerals and Chemicals of Importers and Exporters (CCCMC) on measures to further lower the numbers of iron ore importers and steel traders.
However, it is hard to say whether these production cuts can save the market. Mr. Shan added that according to the CISA's statistics, most of the top 50 producers that have made the largest capacity expansions in the current year are private sector steel mills with annual outputs of below five million mt, whereas Baosteel, WISCO, Angang and other large-scale mills have consistently limited their production. Medium and small-sized steel producers in the various regions are usually able to resume production with ease by taking advantage of their low production costs, thereby leading to the revival of dated capacities.