Baosteel to Slash Capacity by About a Quarter of Last Year's Output Over Next Two Years
Yicai Global
/SOURCE : Yicai
Baosteel to Slash Capacity by About a Quarter of Last Year's Output Over Next Two Years

(Yicai Global) July 13 -- Baosteel Group, China's second-largest steelmaker, said it plans to cut capacity by 9.2 million tons over the next two years, equivalent to about a quarter of its steel production last year, as the country takes measures to reduce excess capacity in the industry.

State-owned Baosteel yesterday published a list of blast furnaces to be dismantled or mothballed that will not resume production. The Shanghai-based company turned out 36.11 million tons of steel last year, ranking it fifth worldwide.

China has been acting to curb steel exports amid lackluster global demand and rising trade frictions with the US, Europe and India over steel products. The country has been involved in more than 30 trade disputes relating to steel so far this year amid severe excess capacity in the industry. Rival producers accuse it of selling overseas at below cost after a slump in demand at home.

In its five-year plan to 2020, the government aims to trim steel production by 150 million tons, which represents an almost 19 percent drop from last year's total. China's steel output fell for the first time in over three decades last year, dropping 2.3 percent to 804 million tons, but still represented almost half of the world's total output of the alloy.

Baosteel and state-owned Wuhan Iron & Steel Corp., the country's fourth-largest steel producer, said on June 26 that they plan a 'strategic recombination,' the global industry's biggest merger in recent memory, forming a company that compares with ArcelorMittal SA. The merged company would have annual production capacity of more than 60 million tons, based on their aggregate steel output last year.

Both firms have performed poorly in recent years because of the impact of economic adjustments and overcapacity. In 2015, Baosteel's net profit slumped almost 83 percent to CNY1.01 billion (USD151 million) from a year earlier, its lowest earnings in the past 18 years. Wuhan Steel's losses hit CNY7.51 billion last year, while it made 26 million tons of steel.

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