80 million mt of new steel capacity to enter Chinese market in 2020

80 million mt of new steel capacity to enter Chinese market in 2020

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Shen Wenrong, chairman of Jiangsu Province-based steelmaker Shagang Group, has stated that he expects that there will be 80 million mt of new steel production capacity entering the Chinese domestic market in the current year. He said that these capacities will emerge under capacity replacement plans, and so they will operate in place of old idled capacities and their productivity will be higher, which will likely result in oversupply in the local market. Meanwhile, Li Xinchuang, vice chairman of the Steel Association and Secretary of the Party Committee of the Metallurgical Industry Planning and Research Institute, commented that the release of such a big steel production capacity within a relatively short period of time will have a big impact on the market.

Mr. Shen forecast that rebar and wire rod prices in the third quarter this year will likely fluctuate within a range of RMB 3,800-4,000/mt ($545-574/mt) ex-works. At the moment, the rebar price of Shagang Group remains at RMB 3,900/mt ex-works. He also stated that finished steel prices will likely indicate a sharp decline in the fourth quarter of the current year, with a possible decrease of up to RMB 1,000/mt ($143.5/mt). At the same time, he suggested that the development of the steel industry which has a key role in China’s economic development should be written into China’s 14th Five-Year Plan.

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