The European Commission’s (EC) estimates of China's crude steel overcapacity have been cut by nearly 20%, according to EC draft documents. The cut follows a meeting between China Ministry of Commerce, EU trade officials, and steelmakers’ association Eurofer. Although reports suggest that the change was made following pressure by China, the new estimates of overcapacity are more realistic, Kallanish notes.

The data show that Chinese crude steel production in 2015 was 803 million tonnes. A healthy industry is typically expected to have about 75% capacity utilisation, but that for Chinese steel is close to 70%. 400 million tonnes of overcapacity would mean production is 66.9% of total capacity while 325mt overcapacity would represent 71.1% of total capacity. This latter figure is closer to the reality.

Data from the China Metallurgical industry Planning and Research Institute at the end of 2014 suggested that China’s total steel capacity was 1.114 billion tonnes/year.

The capacity issue is linked to EU concerns around the dumping of Chinese steel in Europe and also to the debate on China’s application for Market Economy Status (MES) with the World Trade Organization (WTO). European steelmakers say that Chinese government support for its steel producers shows that the country should not be granted MES (see Kallanish 17 March).