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China develops compensation plan for closing old steel plants

The Chinese government has begun considering incentive payments for companies that start shutting down old and less efficient steel plants as part of the country's massive steel production reduction strategy.

China develops compensation plan for closing old steel plants

According to Bloomberg, following consultations on this matter with the China Iron and Steel Association regarding steel products, Qian Gang, Chairman of Citic Pacific Special Steel Group Co., proposed a compensation plan for the closure of outdated capacity in the industry.

However, Citic Pacific delayed this statement and did not provide information on who would make the compensation payments or the stage of the negotiations. This development indicates that China's economic planning agency is following up on its statements pushing for production adjustments to overcome the steel materials surplus and restore profitability in the sector.

China attributes the struggles in the steel sector, particularly to the stagnation caused by real estate developers, and thus includes measures aimed at stabilizing the market. Market analysts predict that China could cut production by up to 50 million tons. However, despite Beijing's efforts to reduce production, China's steel output continues to stay above 1 billion tons.

Currencies related to China's steel production, as well as supply-demand ratios and prices in the global steel market, can be significantly impacted.

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