US tells China steel production cuts needed

The USA’s treasury secretary has said that China should cut its steel capacity, with the current glut “corrosive” to the Chinese economy and harmful to the rest of the world.

The BBC reports that Jack Lew, speaking ahead of the annual US-China Strategic and Economic Dialogue event, said the Chinese government’s misallocation of resources to support China’s steelmakers means that, “Ultimately, the only way to clear the market is to sell things at a price that is below what the world market price would otherwise be.”

The Washington Post reports him as saying the next day, at the opening of the two-day event, that overcapacity needed to be remedied, and that this was a global issue as well as one for China.

China produces over a half of the world’s steel.

“Implementing policies to substantially reduce production in a range of sectors suffering from overcapacity, including steel and aluminum, is critical to the function and stability of global markets,” said Lew.

Pledges by the Chinese government to reduce production by 100 to 150 million tonnes a year in the next five years have been met with scepticism by Nucor.

The US’s largest steelmaker’s CEO, John Ferriola, said seeing would be believing when it came to pledges around capacity cuts.

“What we need is for China to provide a capacity reduction plan that provides timelines and a mechanism to verify that cuts have occurred,” said the CEO in an interview with the The Wall Street Journal.