NDRC: Neither coal nor steel prices have the conditions for a significant rise

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On March 16, the **Development and Reform Commission chaired a plenary meeting of the inter-ministerial task force on reducing overcapacity, deleveraging, and lowering costs. He Lifeng, head of the Development and Reform Commission and convener of the inter-ministerial task force, attended the meeting and delivered a speech. 　　The meeting noted that the recent upward trend in coal prices is mainly driven by a combination of factors such as the rapid increase in electricity demand this year, rising output from thermal power plants, insufficient resumption of operations by coal mines after the holiday period, and the fact that many coal mines were shut down for safety inspections carried out at the local level ； The recent rise in steel prices is mainly driven by the positive results achieved in reducing steel production capacity, rising prices of iron ore that increase the production costs of steel, and improved market expectations; these are all short-term, temporary phenomena. Overall, the supply of coal and steel at present and in the coming period is sufficient, and the situation of supply exceeding demand has not changed fundamentally; therefore, there are no conditions for coal and steel prices to rise significantly. 　　The meeting noted that it is also necessary to pay close attention to changes in market supply and demand, strengthen monitoring and early warning systems, and coordinate efforts to reduce overcapacity while ensuring supply, in order to avoid sharp fluctuations in prices. For coal, as long as prices remain within a reasonable range or above, no measures to reduce production will be introduced ； The gradual end of heating will significantly reduce the demand for coal for heating. Increased water supply from the south, higher generation of hydroelectric power, and greater use of clean energy sources will all lead to a reduction in the consumption of coal for electricity production. Meanwhile, an increase in the resumption of coal mining activities will boost coal supply. Under the combined effect of these factors, the supply and demand balance will ease, and coal prices are expected to show a steady decline. 　　According to 21st Century Business Herald, on March 16, the price of grade 3 rebar in Tangshan, Hebei, was 3,860 yuan per ton, up nearly 20% from 3,300 yuan per ton at the beginning of February. If compared to the level of 3,000 yuan per ton at the beginning of January, prices in March have risen by nearly 30%. 　　Some market insiders told reporters that there is actually uncertainty regarding steel demand. However, since traders are bullish on prices and have a high enthusiasm for stockpiling, there is a high likelihood of steel prices rising, but the market does indeed experience oversupply. For example, port inventories of iron ore, as well as those held by traders, have reached new highs in recent months and even over the past few years. 　　Liu Yongchang, head of the expert group of the Metallurgy Chamber of the All-China Federation of Industry and Commerce, believes that a steel production capacity utilization rate of 70% is actually already close to the normal level, and capacity reduction should be achieved through environmental protection measures and market-based approaches. If only administrative measures are relied on, the blast furnaces of many profitable companies will be shut down, but some zombie companies are revived due to rising prices. 　　It is understood that the aforementioned meeting emphasized that this year is a year for further deepening supply-side structural reforms, and the challenges associated with reducing overcapacity, lowering leverage levels, and cutting costs will increase significantly. The **** and the State Council have set clear goals and tasks; it is necessary to adhere to the general principle of making progress while maintaining stability, to carry out work in an innovative manner, and to ensure thorough implementation of these plans. Capacity reduction must be carried out in a solid and effective manner; illegal and non-compliant production capacities must be thoroughly rectified, so that the production capacity related to substandard steel is completely phased out in accordance with laws and regulations. Backward production capacities must be eliminated using even stricter standards ； Throughout the year, approximately 50 million tons of crude steel production capacity will be reduced, over 150 million tons of coal production capacity will be phased out, and more than 50 million kilowatts of coal-fired power generation capacity will be shut down, suspended, or delayed in construction. At the same time, market-based and legal approaches will be employed to address overcapacity in other industries as well.