Steel Makers Facing Headwinds and is in Need of Government Support
Steelmakers in China are know facing more headwinds as economic growth slows down and there is a need for government support to face the long term overcapacity. This remark came from the chairman of Anshan Iron and Steel Group who seen the Chinese steel factor struggling with tepid growth in demand, persistent overcapacity, increase in environmental protection costs which forced many uncompetitive producers to closed its doors last year.
The government must strengthen the elimination of outdated capacities particularly enterprises that have failed to meet environmental standards based on the new environmental laws. But local Chinese authorities are always desperate to striking a balance between closing down outdated steel mills in hopes to address over capacity along with shielding themselves from the surging unemployment and decreasing tax revenue.
There are three issues to be tackled before a shutdown, namely how to settle any unemployed workers, dealing with debt and the needed capitals for restructuring and upgrading. The government is also urged to cut taxes for domestic miners as tax duty has resulted to high cost miners that re unable to compete with top global miners.
When taxes are not cut, domestic miners will have to shut down causing further unemployment and debt.