China’s steel industry is reportedly considering paying incentives to firms that are willing to shut down outdated steel plants, as a part of the government’s efforts to government’s broader strategy to reduce the country’s massive steel output. According to reports, China Iron and Steel Association, which represents steelmakers, began consulting with mills earlier this year on the plan.
Qian Gang, chairman of Citic Pacific Special Steel Group Co., said the industry is planning on setting up a compensation scheme for closing older and less efficient capacity, according to a report from local media outlet Jiemian citing remarks made at the company’s earnings briefing.
However, his comment has not been confirmed by any representatives for Citic Pacific couldn’t confirm. The report didn’t specify who would pay the compensation nor at what stage the discussions were at.
Earlier this month, China’s economic planning agency announced plans to push steelmakers to reduce production to address a significant oversupply and restore profitability in the sector. The steel industry has been heavily impacted by the ongoing downturn in the property market, the reason why the government is taking measures aimed at stabilizing the market.
Market analysts speculate that China, the world’s largest producer and consumer of steel, could mandate production cuts of up to 50 million tons. Despite Beijing’s ongoing efforts to reduce output, the country’s steel production has persistently remained above 1 billion tons.
The market has speculated that cuts of as much as 50 million tons could be mandated. Output in the world’s biggest producer and consumer of the alloy has stubbornly remained above 1 billion tons despite Beijing’s efforts to guide it lower.
Source: Bloomberg