Chinese steel production is going strong again
China produced 808.4 million tons of steel in 2016. It produced 72 million tons of steel in March 2017, which is a monthly record. It implies a growth of 1.8% YoY (year-over-year). March's rise was China's 13th straight monthly YoY rise in steel production. The previous monthly record was 70.7 million tons of steel production in March 2016. In 1Q17, production was up 4.6%, at 201.1 million tons.
China has been reeling due to overcapacity in the steel industry. The current plan is to cut 50 million tons of steel capacity, which is higher than the target of 45 million tons in 2016. These cuts are intended to reduce pollution in the country. By 2020, China's government aims to close 100 million–150 million tons of steel capacity.
Capacity cuts and the steel industry
If China cuts its steel capacity, which it may have to do despite its apparent reluctance, there could be better days ahead for the global steel industry.
Sustained capacity rationalization could lead to higher steel prices, which should support iron ore prices. Such a development would also be positive for miners (XME) such as Rio Tinto (RIO), BHP Billiton (BHP) (BBL), Vale (VALE), and Cliffs Natural Resources (CLF).