This summer, Shanghai Baosteel Group Corp., China’s largest steel producer, has secured equipment orders and resumed construction activities to complete a new, modernized steel-manufacturing facility in Zhanjiang Province, southwest of Shanghai. While this project will dramatically increase the company's production capacity, some market observers think it will worsen China's massive overproduction and negatively affect global prices, which already are weak.
From a western perspective, the Chinese strategy on steel can be difficult to understand. For instance, customers buy steel from traders in China, not the mills. Last year, traders kept buying even though there was a glut of material on the market. So, the mills kept producing because they had sales.