The Steel Industry Transformation and Development Plan is set to be released; outlook for the steel industry.

Recently, media reports indicate that China’s steel industry transformation plan has been finalized and is expected to be unveiled in the near future. Back in February this year, the Ministry of Industry and Information Technology announced that it would formulate and issue the “Action Plan for the Transformation and Development of the Steel Industry” to improve the sector’s outlook. With the transformation plan now set to be released, it will undoubtedly provide a boost to the domestic steel industry. Notably, in response to circulating rumors that the plan would involve “cutting 80 million tons of steel capacity and capping the number of steel enterprises at around 300,” an official from the Ministry stated that such information has never been officially released by the authorities.

　　In recent years, driven by a domestic economic slowdown, a sluggish real estate market, and illegal or non-compliant construction practices in the steel industry, China has experienced an oversupply of steel products. Many steel companies have sought to expand their sales into overseas markets; however, countries have successively launched anti-dumping investigations, temporarily impeding the export of Chinese steel and further exacerbating the already severe overcapacity in the domestic steel market. As a result, domestic steelmakers are facing significant challenges in achieving profitability.

　　According to the “2015–2020 China Steel Industry Development Prospects and Investment Strategy Planning Analysis Report” released by the Forward-looking Industry Research Institute, China’s steel production capacity reached 1.1 billion tons in 2014, accounting for 60% of global capacity. Over the past year, domestic steel consumption grew by only 1%, and is expected to decline further to 0.8% in 2015. Amid a challenging market environment, the steel industry urgently needs to undergo transformation and upgrading. For steel enterprises, future strategies include reducing excess capacity, expanding e‑commerce channels to boost sales, and modernizing equipment to pursue intelligent, environmentally friendly development—these represent new pathways for transformation.

　　Government policies providing strong support and regulatory guidance to the steel industry are of paramount importance. The issuance of the “Action Plan for the Transformation and Development of the Steel Industry” is expected to help steelmakers cut overcapacity, reduce production costs, and enhance economic performance, thereby helping the sector emerge from its current difficulties. Moreover, since the beginning of this year, under the framework of the Belt and Road Initiative, the export environment for the steel market is set to undergo significant changes. Countries along the Belt and Road generally have relatively underdeveloped manufacturing sectors and inadequate infrastructure, generating substantial demand for steel—conditions that will bolster steel exports. In response, steel companies need to tailor their product offerings to meet the specific needs of different markets and expand their export volumes, paving the way for a very promising outlook in international steel trade.

-Source: Today’s Outlook Network