China shrinks steel industry, but slowly

BEIJING (AP) — China’s steel mills, a target of U.S. President Donald Trump’s ire, are their industry’s 800-pound gorilla: They supply half of the world’s output, so every move they make has a global impact.

The steel industry swelled over the past decade to support a history-making Chinese construction boom. Once that tailed off, the country was left with a glut of half-idle, money-losing mills.

Beijing has closed some mills and eliminated 1 million jobs but is moving too gradually to defuse American and European anger at a flood of low-cost exports that is double the volume of second-place Japan.

Trump responded last week with a blanket tariff hike on steel and aluminum, another metal China’s trading partners complain it oversupplies.

Chinese authorities say they shut down 30 million tons of steel production capacity last year. That cut alone is equal in size to the annual output of the No. 9 producer, Brazil, but only a sliver of China’s 800 million tons.

Beijing’s goal is to make its industry more efficient and profitable, not just smaller. So while some mills close, bigger rivals step up production and could become even more formidable global competitors.

Total steel production rose 5.7 percent last year over 2016 to a record 831 million tons, according to the Chinese Cabinet’s planning agency, the National Reform and Development Commission. That was on top of a 1.2 percent increase in 2016 and more than seven times Japan’s output.

The industry is forecasting another 1 percent rise this year.

“Without the capacity cutting, there would have been much more production than there is now,” said Wang Suzhen, an analyst for Mysteel, a news service that follows the Chinese industry.

Steel and heavy industry have long been a political touchstone for Chinese leaders, which led to economic disaster in the 1950s.

In 1958, then-leader Mao Zedong encouraged the public to produce steel in backyard furnaces for his Great Leap Forward, a short-lived attempt at overnight industrialization.

COMMENTS