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Will Steel Prices Benefit from New China Inefficient Capacity Retirement Plan?
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AddTime：2014-7-29 Hits：978
SHANGHAI, Jul. 29 (SMM) – China’s Ministry of Industry & Information Technology (MIIT) has released its 2014 list of outdated production facilities across 15 industries targeted for retirement. In accordance with the list, 44 iron and 30 steel works, totaling 48.004 million tonnes in annual capacity, are slated for retirement this year. The 2014’s targets for iron production capacity to be closed are nearly 2 times the total of the past two years. Shanghai Metals Market’s ferrous branch Steelease foresees, however, no support to either future or spot steel prices in China.
Steel capacity has been eliminated in recent years in China, but iron production has grown as new facilities have been completed and put into operation.
A review of blast furnaces that have been shuttered over the past three years shows most clustered around 200-400 m³, with design capacities in the 0.5-1 million tonnes/year range. That being said, the MIIT list from 2010 made it clear that these capacities were to be eliminated in 2011.
Further comparative review of published lists indicates that some of equipment and facilities on 2014’s list were previously listed as having been eliminated or moth-balled. This shows that the actual eliminated capacity would be lowered than suggested.
Finally, the current tightness in liquidity has left most investors more pessimistic over future prices, so less likely to act on news of capacity elimination, Steelease understands.
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