The National Development and Reform Commission recently convened a meeting aimed at addressing the growing issue of overcapacity in key industries, particularly in steel. The steel sector stands out as the most affected, with excess production becoming an undeniable reality. Industry experts highlight that this overcapacity has led to widespread losses across the entire steel value chain.
According to data from the China Iron and Steel Association, the industry is currently operating at a loss, with significant reductions in production. It is estimated that annual crude steel output will remain around 500 million tons, possibly even declining further. This trend is influenced not only by global economic conditions but also by the performance of downstream sectors, which are currently unstable.
The oversupply problem has once again raised alarms, with overcapacity in the steel industry creating serious challenges. Hardware and construction materials, key downstream sectors, are facing pressure due to weak investment in construction. As a result, growth in hardware production has hit a new low. The inability of these downstream industries to absorb the surplus steel has contributed to continued expansion of steel production capacity.
This imbalance has fundamentally altered the supply and demand dynamics in the Chinese steel market, leading to increasing pressure on the industry. Excess capacity not only hampers sustainable economic growth but also leads to wasted resources, accumulated debt, and worsening environmental issues.
Moreover, the overcapacity in steel has negative ripple effects on the hardware industry. To stay profitable, hardware companies are forced to cut costs drastically, often at the expense of compliance with national regulations, environmental standards, and worker safety. This can lead to practices such as ignoring environmental protection measures, reducing wages, and evading labor and social security obligations.
Additionally, the reduced profitability of steel companies has limited funding for research and development, slowing down innovation across China’s industrial landscape. Addressing this overcapacity is essential for long-term economic health and sustainable development.
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