China's steel output control policy beneficial for the industry - CISA

With China's steelmakers and steel consumers keenly awaiting a formal statement from the central government regarding this year's crude steel output policy, Li Lizhang, vice chairman of China Iron and Steel Association (CISA), believes that the widely expected production control policy will be good for business.

"After (this year's) crude steel output control policy is introduced, it would be conducive to cap China's total steel production and play a crucial role in improving the profitability of steel companies during this half of the year," Li told China Metallurgical News during the association's latest executive meeting held over the weekend.

Li's remarks were made in a time of wide market anticipation that Chinese steel producers will be required to keep their crude steel output for 2023 no higher than last year, as Mysteel Global has reported. China first introduced a crude steel production control policy in 2021 against the backdrop of Beijing's decarbonization movement and after the country's steel output had peaked in 2020 at 1.065 billion tonnes.

For 2022, China's total crude steel output recorded another on-year fall though the pace had slowed slightly from 2021, with the volume slipping 2.1% on year to 1.013 billion tonnes, as against the 2.8% dip the year before, as Mysteel Global reported.

While another year of steel production controls in 2023 has been much expected, Li also admitted that how effective the control policy will still largely depend on the steel producers' subsequent execution.

"The policy is to be implemented on the premise that China's total steel output this year would be kept flat from last year. And this means that all steel firms in every region across the country would have to control their production to some extent. But such 'one-size-fits-all' approach is probably not the best answer to the question," Li commented.

Rather, he believes that production cuts should be firstly imposed on those steel enterprises that produce more than they're qualified, before the whole steel industry is to control output on a general basis. "And that would probably be fairer for those steelmakers who adhere to production regulations," Li added.

"Once (this year's) production control policy is officially introduced, Chinese steel companies and (even) the whole industry should strictly enforce the policy and follow the rules to maintain the healthy development of the steel industry," Li said.

Moreover, the CISA official expects that should the control policy be effectively implemented, Chinese steel prices will move up for the remainder of the year while the country's imported iron ore prices may decline.

Written by Zhenqi Yang, yangzhenqi@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.