Steel and raw materials research company SBB Research & Consulting reports that Chinese steel producers are ignoring government rules that ban capacity expansions.
The company reports that, if this trend continues and local demand does not pick up strongly, then Chinese exports could return to the high levels previously seen in 2007.
China’s State Council recently reiterated its ban on new capacity expansion projects, stating that no new capacity projects will be approved before the end of 2011.
This follows on a three-year moratorium announced in August 2009.
Despite the 2009 ban, a recent report from SBB Research & Consulting finds that 31 Chinese steel mills have announced 40 new capacity expansion projects in the coun-try since the start of 2010.
The scope of work for these expansion projects consists of 9,9-million tons a year of iron and crude-steelmaking capacity.
A large proportion of the announced new expansion capacity will be for products such as the 16,4-million tons a year, while new hot-rolled flat steel capacity is estimated at
six-million tons a year.
Further, 23 of the 40 expan-sion projects announced this year are being carried out by mills, which are not among the top ten largest producers.
“As with the previous ban, the latest move to reduce capacity additions is meaningless as a result of the continuing expansion projects,” says SBB Research & Consulting China analyst Rafael Halpin.
He adds: “This also puts the latest consolidation target into question.”
Meanwhile, SBB Research & Consulting managing editor Roger Manser says: “Global capacity is currently at about 300-million tons a year.
“These additional new expansion projects in China could well mean much higher exports and depressed global prices in the coming months.”