China to Make Slashing Excess Steel Capacity as Top Priority

China to to Make Slashing Excess Steel Capacity as Top PriorityBy slashing China’s excess steel capacity is one of the top priorities for the government in the next five years as the government is looking to establish a fund that will link to the target. Although there were no details given on the planned funds but traders say that the funds will benefit banks that are exposed to the steel sector.  The funds may be used as compensation for banks and a lot of steel companies are going bankrupt leading to bad loans for banks.

As the steel demand in China continues to shrink after falling in 2014 for the first time in three decades, have pushed producers to losses and forced them to curb production or shutdown for good. The steel industry is chief among the number of sectors that needs to slash production amid the weak demand for the coming years as more than 50 million tons of steel capacity have shutdown in China this include both State owned and private steelmakers.

A analyst estimated that the overcapacity of steel in China is around 200 million tons and is expecting capacity utilization in the domestic steel industry to improve 80 to 85 percent in 2022 or around 73 percent. Meanwhile crude steel out put fell by 2.2 percent of 675 million tons for January until October with a total output of around 87 percent only were consumed for that period.

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