-- China has abruptly suspended its system for approving new steel plants, as the government responds to a deep demand slump that’s crushed industry profits and fueled a surge of exports.Beijing has for years operated a system in which companies can build steel plants on the condition that they remove set amounts of existing, older capacity.
Chinese steel exports have ballooned this year to their highest since 2016, a sign that mills are struggling to find domestic markets for about 1 billion tons a year of output. China’s steel-industry woes have deepened in recent months, and last week the head of China Baowu Steel Group Corp., the world’s biggest producer, warned the industry faced a situation worse than the crises it endured in 2008 and 2015.
“The capacity swap program has actually led to growth, as mills often opted to demolish outdated plants for bigger ones,” said He Jianhui, an analyst at SDIC Essence Futures Co. “Now that the whole industry demand is clearly declining, overcapacity is becoming more and more serious, and this document from the ministry is sending a signal of control.”