China has had difficulty cutting excess steel capacity

If you’ve been paying attention to the Word Steel Association’s global steel production statistics, you’ve noticed that China continually leads the world in steel production. For the month of August, the country produced 87.3 million metric tons of steel, which accounted for roughly 56 percent of global steel production. China’s crude steel output was more than 11 times greater than that of the U.S. for that month and more than 10 times greater than Japan’s production.

China’s production appears to be fueled by growing illegal new capacity, according to an article by Reuters. Despite its efforts to curb overcapacity in its steel sector, an official with its Ministry of Industry and Information Technology said China is still struggling with addressing illegal capacity.

The official, Xing Tao, deputy director of the ministry’s raw materials department, who Reuters says spoke at an unnamed industry conference, said the ministry is conducting audits that are designed to “curb outdated capacity and resolve the overcapacity problems.”

The illegal output includes mills that have not been approved by the government, outdated mills that have reopened after being shut and mills that were supposed to be shut in capacity swaps, Xing said. The capacity swaps involve “moving plants to other regions to reduce the concentration of production in polluted industrial areas,” Reuters reports.

According to the report, Xing did not indicate how much more illegal steel capacity the country is trying to remove.

China has shuttered 700 small steel mills with 140 million metric tons of steel capacity, Reuters reports, as well as 150 million metric tons of inefficient capacity at larger steel producers over its four-year campaign.