b'But both downside and upside risksYearPlan,whichcallsforraisingtheSteeltradersassumedthatthesit-exist for China. Downside risks comeconcentration ratio among the top-10uation will not play out as effectively from the ongoing trade friction with theindustry players from 34% in 2015 toasthegovernmentsstricterapproach U.S. and a decelerating global econo- 60%in2020.Baowu,Chinasnum- last year, and steel prices dropped as my, he added. However, if the Chi- ber-onesteelplayerformedfromaaresult.Implementationofamore nese government decides to use stim- merger between Baoshan and Wuhanflexible-smog policy rather than a one-ulusmeasurestocontainapotentialsteel in 2016, was reportedly in talkssize-fits-all fight on pollution weakened slowdown, steel demand in 2019 willwithMagangGroupoverapossiblesentiments, noted Lee. In other words, be boosted. merger,althoughsomehavedeniedtraders calculated that steel production those reports. If successful, the combi- and supply would grow as a result of The expansionary measures the Chi- nation will create Chinas new top steelthe governments more lenient environ-nese government is considering includecompany with 2017 production of 85.1mental policy.reducing import tariffs and acceleratingmilliontonsrepresenting88%ofthe theimplementationofinfrastructureworlds biggest steel producer, Arcelor- China Steel Production Still projects.Plannedinfrastructureproj- Mittal, which produced 97 million tons ectsincludeone-thousandmilesofHighthat same year.Despitecontinuedsupplyreform policies,Chinassteelproductionre-World steelmaking capacity is down from its mained at a record high, at least as of the end of 2018, with output on target toregistergrowthofwellovereight 2015 peak by 3.5 percent over two yearspercent for last year. There is also ev-idence,accordingtoLee,thatsomeillegalcapacitycontinuestooperate, althoughthegovernmentiscracking subway lines in Shenzhen, Suzhou, andTheChinesegovernmentspoliciesdown on that phenomenon.Changchun, which would generate 80of limiting industrial activities may beSteel producers also upped their pro-million tons of steel demand.moving in the opposite direction withduction late last year in advance of the theadoptionofamoreflexibleap- winterregulations,creatingasupply Chinas supply-side reform has intro- proachforemissionsthiswinter. Thesurplus and precipitating a dip in pric-ducedfundamentalimprovementinChinesegovernmentdidnotrepeates. We expect the supply surplus to be theglobalsteelsector,accordingtolast years across-the-board cuts but al- temporary as steel production in China Lee. China began the reforms in 2016,lowed local governments to decide onwill be negatively hit even under the re-with the target of removing 100 milliontheir own measures to meet emissionvised winter production cuts, said Lee.to150milliontonsofsteelcapacitytargets during the heating season. The and 800 million tons of outdated coalgovernment also reduced its target forLee expects global production growth capacity by 2020. By 2017, 115 mil- the number of days of severe air pol- to slow with Chinas output shrinking lion tons of steel capacity had alreadylution in northern cities from 15% lastbeginningthisyear.Chinasproduc-beenremovedthroughconsolidationyear to five percent in this years initialtion is set to post negative growth in along with as much as 120 million tonsplan to three percent in its final plan. 2019, said Lee, leading to a deceler-of substandard steel capacity.ation in global steel production growth Themunicipalitiesimplementedafrom 3.5 percent in 2018 to 1.0 percent World steelmaking capacity is downvariety of schemes, some of which didto 1.3 percent in 2019.from its 2015 peak by 3.5 percent overnothewtothecentralgovernments two years, said Lee. Global capacitypercentage reduction goals. Its unclearChinas supply reform and environ-totaled 2.25 billion tons in 2017, downat this point how effective these localmentalregulations,Leeconcluded, from 2.33 billion tons in 2015. Chi- measures will prove to be nor their ul- willremainaskeydeterminantsto na continues to work towards industrytimate effect on steel production withinglobal output.consolidation, Lee added. thelargerpictureofcapacityreduc-Chinasindustry-consolidationpro- tions.gramisoperatingoffthe13thFive-2019 Collection Breakbulk Shipping 9'