How to Treat the Impact of China’s Steel Overcapacity on the International Steel Market

Recently, a steel conference held in Brussels City of Belgium draws large public attention at home and abroad. It was reported that in conference, many countries indicated that China is supposed to be responsible for the steel overcapacity in global steel market . As Shen Danyang, spokesman of Ministry of Commerce said, since China is one of the largest trading countries in the iron & steel industry, Chinese government is ready to be present in the discussion and actively work to cope with all the current issues.

On the other hand, China as one of the largest steel pipe manufactures in the world, current steel overcapacity to some extent will have certain influence on both domestic and international steel pipe markets in a short time. As is known to all, iron ore, the basic raw material for a steel pipe is always the focus in steel pipe industry. Furthermore, it is likely that a slowdown in the biggest steel market will have an impact on iron ore and steel companies globally. Today the majority of Chinese steel-makers tend to take some related measures to cope with the current situation in the marker both at home and abroad.

As a matter of fact, with regard to the excess steel capacity in steel market, Chinese government had ever issued guidelines in October 2013 to reduce steel capacity by 80 Million tonnes (Mt) by 2014. Besides, the government also announced to close the old technologies and obsolete operating capacities of 15 Mt by 2015. Nevertheless, the steel output still increased 7.5% in 2013. In a sense, it is likely to attribute the so-called “additional capacity” to opening new plants.

In addition, current overcapacity of steel production in domestic market, to some degree, will have great effect on the steel prices. In turn, what has happened to steel prices will also cause certain price fluctuation at the same time. For instance, at present, there exists a big wave for steel pipe prices both at home and abroad market, which is mainly caused by the raw materials (iron ore) and the unbalance between supply and demand in market. Therefore, in domestic market, some pipe suppliers are trying to adjust production structure to avoid further unnecessary risk. Obviously, this will be reflected in the production management of cold rolled steel pipes and some other types of pipes in the coming days.