China’s biggest listed steelmaker has said it expects to increase output by 20% in 2016, underlining the problems facing the British steel industry amid a global glut of supply.

Even as China steps up efforts to slash its bloated steel making capacity amid a rise in anti-dumping complaints, Baosteel said it produced 22.6m tonnes of crude steel in 2015 and is likely to produce 27.1m tonnes this year.

The UK’s entire annual output is a little over 10m tonnes and Tata Steel has blamed cheap imports for forcing the sale of its operations in Britain.

China has been aggressively shipping its surplus steel products overseas and selling them, according to other producing nations, at unfairly low prices. Exports hit a record 112m tonnes last year.

Total steel capacity in China is estimated at around 1.2bn tonnes and is expected to further increase this year, according to the China Iron and Steel Association.

Baosteel’s huge Zhanjiang steel production base, with an annual capacity of about 9m tonnes, goes into operation later this year, its board secretary Zhu Kebing said on Thursday. Baosteel is the listed arm of China’s second biggest steel producer – the Shanghai-based Baosteel Group.

“As a result of the completion of main production lines at the Zhanjiang project in 2016, the scale of the company’s output will show an increase,” Zhu said, adding that steel prices, currently near decade-lows, are expected to remain weak.

The plunge in the prices of steel amid a slowdown in China’s economic growth has taken a toll on producers’ earnings, with Baosteel reporting a 82.5% year-on-year slump in 2015 net profits to 1.013bn yuan (£100m).

Other steel firms fared even worse last year. Maanshan Iron & Steel reported losses of 4.8 billion yuan after a modest profit in 2014, Hunan Valin Steel also posted a loss of 2.96 billion yuan, while the Angang Steel Company reported losses of 4.59 billion yuan.

With China’s steel capacity surplus at around 400m tonnes, the government is aiming to shut around 100-150m tonnes of capacity in the next five years.

Local governments are currently working out how the capacity closure targets will be divided among producers, Zhu said.



“Looking over the long-term, China’s steel demand has already hit a peak and some capacity needs to be withdrawn from the market, or merged and restructured, and this will benefit the company by raising our market value,” he added.

Increased buying from Chinese steel mills has buoyed iron ore prices this year, but Zhu does not see this rally lasting.

Spot iron ore prices have risen 24% so far in 2016, but have fallen 16% from this year’s high of $63.30 a tonne reached on 8 March.

“The price increase in March was the result of many different factors, and short-term fluctuations are normal, but (we) don’t think it is sustainable,” he said, adding that iron ore will remain oversupplied this year.