1. The Central Economic Work Conference was held in Beijing from December 18th up to 21st 2015. According to the statement released in this Conference, it is required to properly deal with the relationship between social stability and structural reform while eliminating overcapacity, to carry out merging and restructuring as much as possible instead of bankruptcy and liquidation. Moreover the new-coming capacity must be controlled strictly to avoid a new round of overcapacity.
MPI's comments: Overcapacity elimination of Chinese steel industry is deemed as the top priority comparing with other industries. Many tasks should be carried out to remove overcapacity of the steel industry such as elimination of backward capacity, optimization of industrial structure, shutdown of zombie companies and companies below environmental standards, as well as strict control of new coming capacity while removing the inventory. In addition, steel companies must do everything possible to settle the staff properly e.g. providing training for reemployment etc.
2. According to the news released by Bloomberg on December 23rd, Baosteel and his partner have set aside a proposed iron ore project in Australia, which represented strong impact of collapse of the iron ore industry on new projects development.
MPI's comments: The iron ore price, which is finally determined by relationship of supply and demand, will decline continuously due to oversupply. There will be no sufficient power to drive the import price growing up over the coming years because of oversupply and weak steel market. Therefore the iron ore industry will be confronted with serious oversupply, and the iron ore price will maintain at a low level.
