Overproduction and price decline have become synonymous with Chinese steel industry. Despite all the shrill about malaise of steel deluge playing havoc with the market sentiments in China production has remained recalcitrant with steel production jumping by 4.9% in the first 4 months (Jan-April) YOY at 269.881 million tonnes and 68.835 million tonnes in April MoM growth of 4.9%.

Despite aspirations of clocking economic growth of 7.5% in 2014 and moderate to improved steel demand from the massive potential in rural infrastructure and rail network steel price levels have remained depressed for most part the year. Accordingly some drastic measures planned by the government and its agencies have been as follows

China will close down 15 million tonnes per year outdated steel production capacity and 15 million tonnes per year outdated iron making capacities before the end of 2015 in addition to capacities already specified for closure during the 12th Five Year Plan period (2011-15).

Based on the State Council's 12th Five Year Plan issued in August 2012, China is to shut 48 million tonnes per year of outdated steel capacity and 48 million tonnes per year iron capacity before end 2015.

The additional capacities have been ordered for shut down to combat pollution as emissions during 2011-13 lagged requirements.

In mid-May, Chinese mills have somewhat reduced production facing weaker market sentiment. In particular, CISA accounting for some 80% of total steel production in China reported a 1.3% decline in daily steel melting to 1.801 million t over the period under review. Market players believe this is due to seasonal downturn in domestic demand.

Chinese authorities are awake to the reality of oversupplied market and attempts at reining in production have not yielded desired result owing to fragmented structure of the industry in which mills located in forlorn areas operate more on socialistic concerns of employment generation diluting the attempt.