China has commenced construction of a large steel plant which is estimated to have production capacity of 9.4 million tonne each year. The plant coming up in the Hebei province is in line with the country’s plans to build new, efficient plants on the coast, despite shrinking demand.
Caofeidian, which is one of the largest ports in China is the site of the project. The project is an extension of the steel complex Shougang Jingtang. This is one of the many integrated steel projects that have been planned by top steel mills in the country and were approved at the time of the commodity boom.
The plant, with a total investment of US$6.79 billion is marked for cut down of costs for iron ore and coal that are imported, as stated by the National Development and Reform Commission (NDRC).
As the steel sector struggles with reduced demand and chronic overcapacity and prices plunged to a 20-year low, shrinking several small mills into the red.
From one year from now, the total investments in the steel processing sector dropped by 12.3% in the last seven months that ended in July, as stated by NDRC.
But, the large firms that are owned by the state endure fewer restrictions on credit in comparison to their smaller rivals, with lower shipping costs being advantageous for these large companies.
China has plans to construct three to five large steel mills and increase steel output of the top 10 steelmakers by more than 60% of the total production capacity of the country by 2025.
Wuhan Iron & Steel and BaoshanIrn & Steel have planned almost 10 million tonnes of added steel capacity in the coastal region to gain advantage of the proximity to buyers in South East Asia and ore importers.