Handelsblatt Exclusive Studies: Chinese Steel Overcapacity Hardly Changed in 2016

Despite Beijing's promises to tackle overcapacity, China's excess steel capacity hardly changed last year, according to two studies. It puts continued pressure on European steel producers.

Chinese steel production rose by 36.5 million tons in 2016 despite Beijing’s claims that the country’s potential production capacity had been reduced by 65 million, according to a Greenpeace study obtained by Handelsblatt.

The German Steel Federation also found that China has failed to reduce its overcapacity. The country’s excess steel production capacity stood at 364 million tons in 2016, about the same level as the year prior.

“Overcapacity in the Chinese steel industry is expected to lie clearly above the 300-million-ton mark through 2020,” said a spokesman for ArcelorMittal, a steel company based in Luxembourg.

Beijing said it had reduced its steel production capacity by 65 million tons. Chinese President Xi Jinping said at the World Economic Forum in Davos that Beijing would continue to reduce its capacity.

But Lauri Myllyvirta, an activist with Greenpeace, said many Chinese provinces had interpreted Beijing’s directives liberally and even temporarily restarted some previously moribund steel furnaces.

European steel producers have been slammed by Chinese overcapacity in recent years, which led to a collapse in prices. The industry lobbied Brussels to impose anti-dumping measures as it hemorrhaged red ink.

Prices have risen since the anti-dumping measures were imposed. Chinese steel exports to Europe have declined from 7.2 million tons in 2015 to 6.1 million tons in 2016.

Total steel exports to Europe, however, increased by 11 percent during the same period. The former Soviet states, Turkey and other Asian countries have increased their exports.