Between 2010 and 2014 China cut 120Mmt of iron making capacity and 90Mt of steel making capacity, according to the Ministry of Industry and Information Technology.
In 2014 the country eliminated 31Mt of outdated steel capacity and in doing so completed the task set by the 12th Five Year Plan of 2011-2015 a year early.
While the cuts ease pressure on China’s domestic steel industry, the country’s medium and large-sized steel companies are expected to be in the red during Q1 of 2015, according to the China Iron and Steel Association. In February, up to 50% of these companies were in the red and by March, insufficient orders and high stocks added to the financial pressure.
While iron ore prices have fallen below US$60/metric tonne, steel prices have plummeted even further, analysts claim, and now that China has implemented strict new environment laws, the mills face rising costs to remain in compliance.
There are media reports claiming that in Jiangsu province electricity prices are being raised for steel mills failing to meet China’s new environmental standards.
But it’s not all bad news. Only one of China’s listed steel mills – Lingyuan Iron & Steel Co – suffered a loss last year. Other companies, such as Daye Special Steel, Jiuli Hi-Tech Metals, Nanjing Iron and Steel and Fangda Special Steel Technology recorded profits in excess of 100 million yuan. Others have yet to release their results but are expected to announce gains. Hebei Iron and Steel increased net profits by over 500%.
Source: China Metals.