China pledges to cut excess steel and oil refining capacity

Friday 06 March 2026 - 14:50

By: Dakir Madiha

China pledges to cut excess steel and oil refining capacity

China’s top economic planning body has announced plans to curb excess production capacity in major heavy industries, including steel and oil refining, as the country continues to struggle with persistent overproduction across key commodity sectors.

The National Development and Reform Commission (NDRC) outlined the measures in its annual report submitted to the National People’s Congress, which opened its 2026 session on March 5 in Beijing. According to Reuters, the agency said it would reduce production capacity in steelmaking, oil refining, and other unspecified industries in a “planned manner.”

The commission also said capacity would be more tightly managed in sectors such as copper smelting, alumina production, and coal based chemicals. However, unlike the steel and refining industries, the report did not explicitly call for production cuts in those areas.

The announcement repeats commitments made by Beijing during 2025, when authorities promised to restructure the steel industry and increase oversight of new copper and alumina projects as part of the country’s 15th Five Year Plan covering 2026 to 2030. At the time, the NDRC instructed local governments to align project approvals with national industrial policy to limit what it described as irrational investment and uncontrolled expansion.

Several copper smelting projects were suspended in late 2024, and the China Nonferrous Metals Industry Association said plans for roughly 2 million metric tons of new copper smelting capacity had been halted.

Despite the renewed policy signal, the latest NDRC report did not include specific reduction targets, leaving analysts and traders uncertain about the scale and timing of the measures.

China also said it would intensify exploration, stockpiling, and development of strategic mineral resources while expanding efforts to secure raw materials overseas.

The announcement comes as the copper market faces growing pressure. Inventories of copper held by private participants in major Chinese consumption hubs reached 531,700 metric tons at the end of February, the highest level since early 2020, according to Shanghai Metals Market data cited by Bloomberg.

Spot copper premiums in China have turned negative as manufacturers delay restocking due to elevated prices and uncertainty surrounding potential US tariffs on refined copper imports.

China’s refined copper output continues to rise. From January to November 2025, the country produced about 13.3 million metric tons of refined copper, an increase of 9.8 percent compared with the previous year and a pace that could lead to a record annual total.

The expansion of refining capacity despite limited global mining supply highlights the imbalance Chinese policymakers are now trying to address.

The NDRC indicated that industry consolidation through mergers led by major companies will likely be favored over widespread plant closures, a strategy analysts say could take years to significantly reshape China’s vast metals sector.