China's steel industry has reportedly been saddled with a high inventory throughout the year, which has constrained the sector's profitability. China's steel resources increased by 17.9 per cent year-on-year in June and the growth swelled to 32 per cent in July and up to 46 per cent in August.
Reports are that China is now sitting on capacity of 610 million tonnes and will be commissioning another 50 million tonnes next year. A representative for China Iron & Steel Association (CISA) said at a recent conference in Beijing that the country would end the year with production of 565 million tonnes of crude steel.
That will be a lot more than China's domestic requirements, making the world, including India, vulnerable to dumping. CISA is no doubt estimating domestic demand by several million tonnes extra at 549 million tonnes.
Shan Shanghua, secretary-general of CISA, noted that in the first eight months, Chinese steel output gained 5.2 per cent or 18.28 million tonnes, in contrast to global drop of 32.4 per cent or 186 million tonnes.
In September the nationwide output of steel on daily basis peaked at 1.69 million tonnes, equivalent to yearly total of 617 million tonnes and the aggregate amount in the first ten months is reported up over 10 per cent year-on-year.
Wu Xichun, honorary director of CISA, said if the September daily output carried on into the fourth quarter, the nation would have roughly 20 million tonnes surplus this year, putting much pressure on the market next year.