Experts say overcapacity will cause long-term instability in China's steel prices

May 16, 2021

Wu Xilu, an adviser to the China Iron and Steel Association, recently stated at the China Steel Traders Conference in Liaoning that China’s steel production capacity will be further exacerbated, which will make the domestic steel market difficult to maintain stability, and will feature shorter cycle times and higher frequency.
Wu Xilu revealed that in 2009, investment in projects under construction in China's steel industry reached 340 billion yuan, an increase of 3% year-on-year, while investment growth in 2008 was 23%. In 2010, these projects will increase China's crude steel production capacity by at least 50 million tons, which means that China's steel production capacity will reach 710 million tons next year.
In the face of the global financial crisis and sluggish steel exports, the contradiction between China's steel supply and demand will further intensify, and it will lead to frequent volatility in the steel market and it is difficult to maintain stability. “For a period of time in the future, the domestic steel market will be turbulent and unstable, and the lifting cycle will be shortened and the frequency will increase.” Wu Xirong judged that under the background of serious overcapacity in China’s steel production, ordinary steel prices that cannot be imported in the future will be long-term. Lower than international prices, and as the advantages of low-cost steel companies in mainland China gradually weaken, the number of steel imports from China is likely to increase, "China's renewed status as a net importer of steel in the first half of this year proved this."

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