Via Morgan Stanley:
We visited local steel-related firms/trading companies in China following the National People’s Congress session. Steel sector restructuring has gained steam after being repositioned as a national project, rather than industry-led reform.
We expect steel sector realignment to steadily advance. In 2017, reduction of illegal induction furnaces is likelyto havea majoreffect. As previously reported, China’s 13th 5-year plan aims to reduce the country’s crude steel capacity, said to be as much as 1.2bn tons/year, by a total of 140mn tons by around 2020. China announced 65mn tons/year of crude steel capacity was eliminated in 2016 (est. 20% or so of that was capacity in use). And at the 12th National People’s Congress in March 2017, China presented its goal of reducing steel capacity by about 50mn tons/year in 2017 (nearly all capacity in use).
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