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Chinese steel official sees industry reshuffle amid capacity cut


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Chinese steel official sees industry reshuffle amid capacity cut

Capacitycuts of up to 150 million tonnesacross China's steel industry are expected to result in an industry reshuffle, whichwill change the ranking of domestic steel majors, according to Li Xinchuang, deputysecretary general of the China Iron & Steel Association.

In aninterview with SNL Metals & Mining on the sidelines of Mines and Money Asia2016 in Hong Kong, Li said April 7 that Beijing is pushing for M&A deals indomestic steel producers, in a bid to "improve efficiency and reduce capacity."

"Thecapacity cut plan would not succeed without an industry-wide reshuffle and competitivenessimprovements," said Li, who is also president of the China Metallurgical IndustryPlanning and Research Institute.

Withoutreferring to any specific companies, Li said that "it is very important forsteel producers to keep an open mind for collaboration and integration."

Li addedthat coordinating such deals could be very difficult as it involves various interestgroups.

AmongChinese steel majors, Baoshan Iron& Steel Co. Ltd. recently denied rumors of a merger with Wuhan Iron & Steel Co. Ltd.

In additionto industry integration, Li said that the Chinese authorities will proceed withcapacity cuts by closing illegal mills, as well as loss-making producers.

Li notedthat China's consumption of steel products will drop to about 595 million tonnes by 2020 and to 492 milliontonnes in 2030, but expected steel exports to remain at high levels.

"Inthe future, China's steel exports will remain at high levels as we provide productsof good quality, good service and good price," Li said. "It would takeat least 10 years for the market to absorb the excess capacity."

China's steel exportsincreased to 112.4 million tonnes in 2015, up around 20% from a year ago.