ANNUAL REPORT

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levels. 135 The situation is only expected to worsen as Chinese steel
companies continue to expand their production capacity despite
lower demand, with global steel production declining 1 percent in
the first eight months of 2016 compared to the same period in
2015. 136 World prices for hot-rolled coil and rebar, meanwhile, declined
by 29 percent and 20 percent year-on-year, respectively, in
2015. 137 A brief rebound in Chinese steel prices, up more than 50
percent during the first four months of 2016, led mills to restart
or increase production, further contributing to global overcapacity.
138 In August 2016, China produced 68.6 million metric
tons of crude steel, a 3 percent increase from August 2015 and
more than half of the month’s global steel production, even though
domestic use continues to decline. 139
The severity of China’s overcapacity has extended into other industries
as well, with utilization rates in oil refineries, cement
plants, and coal plants dropping 5 percentage points, 9 percentage
points, and 11 percentage points, respectively, since 2008 (see Figure
4). 140 Aluminum utilization rates in China have also seen declines,
dropping to 76 percent in 2015, a two percentage point decrease
from 2008 levels. 141 Of the world’s six largest aluminum
producers, two—Aluminum Corporation of China Limited (Chalco)
and China Power Investment Corp. (CPI)—are Chinese SOEs. 142
Because they receive state funding and financial support, China’s
aluminum firms also continue to increase production despite declining
returns: although 60 percent of China’s aluminum producers
were unprofitable in 2015, the country produced a record 32 million
metric tons of aluminum—a 12 percent increase from 2014. 143
Figure 4: China’s Utilization Rates for Select Industries, 2008 and 2015
dkrause on DSKHT7XVN1PROD with USCC
Source: European Chamber of Commerce in China, ‘‘Overcapacity in China: An Impediment
to the Party’s Reform Agenda,’’ February 2016, 6; U.S. Energy Information Administration,
China, May 14, 2016, 15; Christine Shearer et al., ‘‘Boom and Bust 2016,’’ Sierra Club, March
27, 2016; Organisation for Economic Co-Operation and Development, ‘‘Recent Market Developments
in the Global Steel Industry,’’ February 16, 2016, 12; and Nathan Vanderklippe, ‘‘China’s
Huge Cement Industry Latest to Face Massive Cuts,’’ Globe and Mail, May 30, 2016.
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