China Studies Lifting The Veto On Steel Production

China Studies Lifting The Veto On Steel Production

This decision will move the prices of raw materials again. China decided this summer its strategy on pollution and climate change was going to change. It has been two months in its efforts to reduce steel production in the country – it is the second most polluting industry, after utilities – but now, with the Covid crisis still uncontrolled, pressure is being put, in a certain sense, so that The Beijing government raises its hand again, according to The Wall Street Journal .

It must be taken into account that China is the largest producer -by far- of steel worldwide, representing more than 50% in global terms . A priori, the decision firmly adopted by the Politburo in July, but which has been in the making for months, was beneficial for European firms to the extent that China was exercising – and continues to be – unfair competition, given its lack of environmental criteria, which make more expensive production. It is a situation that Europe has tried to curb with safeguard measures (or tariffs) that are regularly updated.

For now, firms such as ArcelorMittal have benefited this summer from the rise in metal prices that caused this decision, although everything could change again. Since the beginning of July, iron, which was at record highs and is the main commodity with which steel is made, has fallen 32%. The steel coil has lost 8% since July, for its part.

The largest steel producer in the Asian giant is Baoshan Iron & Steel Co. It believes that “iron prices have entered a downward channel that will continue for the second half of the year,” according to statements made to Bloomberg by the company’s CEO.

This same week the ten largest firms in the sector -which represent 70% of national production- have committed to maintaining supply (if the economy grows again strongly after the Covid), but they acknowledge that “for now there is enough stock for a demand that remains stable, “says Bloomberg, who echoes statements produced through WeChat [the Chinese WhatsApp].

Officially, the Chinese Government maintains its objective of reducing steel production below that registered in 2020 to meet its environmental objectives and these cuts are also contemplated for the year 2022. However, sources close to the Government do not rule out “a possible review to adjust supply to demand “, point out analysts Bloomberg .

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