The Hard-to-Believe Steel Shortage That’s Unfolding in China – by Jasmine Ng, Perry Williams and Stephen Engle (Bloomberg News – June 5, 2017)

The world’s top steelmaker may have a shortage of steel. China has a lack of rebar, according to iron ore miner Fortescue Metals Group Ltd., which says a shortfall of the key product helps to explain a divergence between the price of the commodity it digs up with the alloy it’s made into.

There’s a shortage of rebar, Fortescue’s Chief Executive Officer Nev Power said in a Bloomberg Television interview in Beijing on Monday, citing closures in China of some steel producers, especially operators of induction furnaces. Rebar, or reinforcement bar, is a basic item used to reinforce concrete.

China makes half of the world’s steel, and in recent years it’s been more associated with excess production, soaring steel exports, and sinking prices.

That pain has spurred the government — egged on by Group of Seven policy makers — to press on with shutdowns of outdated plants, promote consolidation and clean the air that’s polluted by smokestacks. Over the past year, the closure of induction furnaces, which use electricity, has been a focus.

“Induction furnaces typically make rebar and as those furnaces are closed down, it’s created a shortage of rebar and the prices have gone up,” Power told Bloomberg Television. “The margins that are being made in rebar at the moment we don’t believe are long-term and as new production comes in, we’ll see those margins comes back to normal.”

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