The IMF has called on China to further raise its excess capacity target in its steel and coal industry. At the same time, more factories will be put to use modern technology.
Inside a steel mill in China.
China, the world's largest producer of steel and coal, has launched a massive capacity reduction campaign in a number of different industries, including the coal-based energy sector and the manufacturing industry. building materials. The country is trying to shut down ineffective plants and tackle environmental pollution.
According to Beijing's plan, within three to five years, the country will shut down its steel plants with a capacity of about 140 million tons and coal mines with a total capacity of about 800 million tons, roughly equal to 1. / 10 total world capacity in 2016.
"The cutting targets were well done in the early stages, but could do better. Based on China's current cutting targets, its billet production capacity in 2018-2020 will be about the same as in 2013, accounting for about 50% of global capacity. At the same time as the cuts are made, investment is still on track, "the IMF said.
IMF comments came after Chinese manufacturing data was released on Monday. The country's steel output hit a record 74.02 million tonnes in July, although it was considered as the weakest month for China's construction and consumption of steel products.
Up to now, about 120 million tons of low quality steel capacity has been cut. That made the supply tight and steel prices higher. Steel mills using modern technology are more profitable, so they increase production and increase steel production, analysts said.
Futures and thermal coal futures prices in China rose 45.4% and 44.9% respectively this year.
The IMF has said that in order to step up its reduction program, China should not rely too much on administrative measures such as reducing plant operating hours, joint ventures and price controls from the government. .
"Increasing taxes on environmental resources, reducing energy subsidies, and tightening regulatory standards will help eliminate factories that use weak technology," the IMF said.
According to Economics & Consumer