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China's Baosteel shuts down blast furnace to reduce overcapacity

Bnamericas Published: Tuesday, June 21, 2016
China's Baosteel shuts down blast furnace to reduce overcapacity

Baosteel, China's second largest steelmaker, reportedly shut down a blast furnace as part of a national effort aimed at reducing the local steel sector's overcapacity.

The shutdown took place at the company's stainless steel unit in Shanghai (pictured), which produced 2.5Mt/y of pig iron for carbon steel products, Reuters reported. The unit will keep output at the 1Mt/y mark, the report said.

Baosteel produced about 35Mt of crude steel in 2015, down 2.65% year-on-year.

Chinese officials recently recognized that there is a steel overcapacity issue in the country and vowed to reduce output, but no "overnight solution" exists, they said.

Steel overcapacity was above 700Mt at the end of 2015, and new plants are set to add another 47Mt by 2018, according to an OECD analysis. Meanwhile, steel consumption is expected to have declined last year, according to the organization.

China's crude steel production increased 1.8% year-on-year in May to 70.5Mt, as a price rally and seasonal demand spurred local producers to boost output.

May figures helped bring production for the first five months to about 330Mt, down 1.4% from the year-ago period.

CAPACITY CUTS?

China's highest administrative body, the State Council, announced in February the country planned to cut 100-150Mt of steel capacity over the next five years.

A few months earlier, the China Iron and Steel Association called for local steel capacity cuts, as the country was suffering from overcapacity and weak demand.

Global steelmaking capacity stands at around 2.3Bt, and cuts of 400-500Mt are needed by 2020 to balance the market, but few believe such cuts will materialize.

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