Chief Engineer of the China Metals Planning and Research Institute Mr. Li Xinchuang said fears of oversupply are seriously affecting the steel sector in China, as about 80 million tons of fresh capacity will enter the market this year amid cuts demand due to COVID-19 epidemic. He said: “The new capacity was primarily the result of a capacity replacement program that was planned by the Ministry of Industry and Information Technology to help metallurgical companies get rid of obsolete capacity and give these companies permission to new capacity at certain levels. The new steelmaking capacities, released in a relatively short time, will have a great impact on the market, especially since the COVID-19 epidemic has reduced demand in both domestic and foreign markets.
He added: “If the production of steel companies exceeds market demand, it will be difficult to implement a reduction in inventories. High stocks may become the norm in the steel market this year. At the same time, high stocks will erode funds and affect overall turnover. ”
Mr Li said the country’s steel production is likely to surpass 1 billion tonnes this year, and steel production is likely to account for over 56 percent of global production this year.
China produced 499 million tons of crude steel in the first six months of this year, up 1.4 percent year on year, according to figures released by the National Development and Reform Commission.