SHANGHAI, April 8 (Reuters) - China’s Maanshan Iron & Steel plans to cut its steel capacity by about 20 percent over the next three years as it tries to a weather a slowing economy and an industry-wide supply glut, a company executive said on Friday.
China as a whole is trying to cut steel-making capacity by between 100 million and 150 million tonnes in the next five years as it tries to tackle a chronic glut that has sent prices into a tailspin and saddled steel mills with huge losses and mounting debt.
Large-scale steel mills made combined losses of 11.4 billion yuan ($1.76 billion) in the first two months of this year and more than 100 billion yuan last year, according to the China Iron and Steel Association.
Maanshan Steel plans to cut 4.2 million tonnes of capacity over the next three years, from current 22 million tonnes currently, Qian Haifan, the general manager of the company told Reuters on the sidelines of an industry conference.
The company, the listed unit of the Maanshan Steel Group, one of China’s biggest state-owned steel enterprises, also aims to expand its foreign business, and will increase its overseas units from four to seven by 2017.
“We will stick to our export strategy of selling about 10 to 15 percent of our production abroad,” Qian said. “Steel mills have to become more international.”
China’s mills have been accused of dumping millions of tonnes of cheap steel on the global market, causing producers elsewhere to close and raising the risk of more anti-dumping actions against the country’s firms.
With protectionism on the rise, China’s exports were expected to fall this year, from a record 112 million tonnes in 2015, Qian said.
Maanshan Steel is aiming to move up the value chain and produce high-end steel products like bearing steel and auto sheets, which China currently imports. Qian said the firm would aim to upgrade its low-end production lines by 2020.
The company will also modify its production lines to customise its products in accordance with the requirements of its downstream users.
“Supply side reform doesn’t simply mean capacity cuts but also restructuring in both output and quality,” he said.
He said the steel market as a whole was likely to see an improvement on last year, and mills would even make a profit in the peak consumption season from March to May.
However, global iron ore prices were likely to remain at around $45-50 a tonne this year, with steel mills likely to maintain low levels of stocks, said Qian.
$1 = 6.4794 Chinese yuan renminbi Reporting by Ruby Lian and David Stanway; Editing by Christian Schmollinger
Our Standards: The Thomson Reuters Trust Principles.