Iron ore stocks at Chinese ports are at 109.55m tonnes, data from Steelhome showed on Friday, historically high in absolute terms but still relatively low in terms of the size of the industry's import demand.
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Data from the first quarter of the year show that China is on track to produce 822m tonnes of steel this year, a rise of 5.5 per cent from last year's output, despite the rising debt levels, increased financing costs and the prospect of more environmental regulation.
More capacity is still being built, lamented CISA vice-chairman Zhang Changfu, further squeezing margins in the industry.
"With the industry in such a state, how can new capacity still be built?" Mr Zhang mused at CISA's quarterly press conference.
The extra capacity flies in the face of a political campaign to close some polluting plants in Hebei province, which surrounds Beijing, to meet targets meant to reduce pollution around the capital. The trade-off for Hebei, which fears the loss of jobs and local tax income, is greater regional integration with Beijing and Tianjin, a large northern port city.
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Hebei has trumpeted the destruction of steel mills to show its willing co-operation with the targets. First quarter data from Hebei show some drop-off in steel output, having a negative impact on provincial GDP growth, although steel industry sources say the plants that were demolished were already idle due to an inability to repay debt.
Zhang told reporters to "believe the Hebei government's statistics" when asked how much operating capacity had actually been shut. He refused to specify where the new capacity was under construction, calling it a "sensitive question".