Economist reports:
China’s stated aim of reining back steelmakers and consolidating state-run firms has happened “mostly on paper”, according to Philipp Englin of World Steel Dynamics, a consultancy. The central government wants cheap steel, so it is unwilling to take radical steps to curtail overcapacity. Meanwhile local governments are encouraging more steel mills to set up shop. They are a vital source of direct and indirect employment, and tax revenues. To these enterprises, profits are unimportant.
Since China itself will have little need for this unprofitable steel, it will inevitably add to the country’s exports, further depressing world prices. Chinese exports are likely to be 30m-50m tonnes in each of the next few years—a small share of the country’s total production of almost 750m tonnes, but an amount that now exceeds the tonnage sold abroad by longer-established exporters such as Japan, South Korea, Ukraine and Russia.
