Steel crisis in China: production falling to avoid global tariffs
21/10/2024
Steel crisis in China: production falling to avoid global tariffs.
Beijing stops authorizations for new plants. 95% of Chinese steel companies operate at a loss and the sector is slowing down, but exports grew by 21.8% in the first seven months of the year, triggering the imposition of anti-dumping measures also by many Asian countries and of Brics allies such as India and Brazil.
The Chinese Government is trying to crack down further on the hypertrophic steel sector, in an attempt to stem an excess of production which has not only brought local businesses to their knees, but is causing economic and political repercussions on a global level which are increasingly they risk backfiring against Beijing. The boom in exports of steel products from China - exacerbated by the weakness of domestic consumption - is sinking metal prices around the world, with growing difficulties also reported by giants of the caliber of ArcelorMittal. But above all it fuels diplomatic tensions, which no longer involve only the United States and the European Union: anti-dumping investigations and the imposition of duties on "made in China" steel are multiplying, today also by many Asian countries - from Vietnam to Thailand to Malaysia – and even by some Brics powers that Beijing cannot afford to antagonize, specifically India and Brazil.
The latest restriction imposed by the Chinese Government is the complete suspension of authorizations to build new steel mills in the country: the measure was communicated yesterday, with immediate effect, by the Ministry of Industry, which promised to develop new guidelines in the future. Those in force up to now allowed the construction of plants only in the face of the closure of other production lines, a policy that has proven to be ineffective and which has not prevented the Chinese steel industry from developing in an uncontrolled way, exceeding one million tons of production per year : more than half of global output and more than double the operational capacity of the US, EU and India combined. Even the measure just announced will be of little use, Citi analysts fear, according to whom "more drastic measures are needed, including aggressive production controls" and greater severity from Beijing in enforcing compliance.
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