With China’s crude steel output in the first ten months of 2016 up nearly one percent year on year, many have wondered aloud how to make sense of the data, especially as fresh claims of progress on supply-side structural reforms have recently emerged.

According to the National Development and Reform Commission last week, the target to cull 45 million mt in steel capacity this year was achieved by the end of October.

So why is steel production not receding? Do the effects of the capacity cuts need more time to be realized, or have we been treated to a belch of hot air by Beijing’s propaganda machine?

A key to answering these questions lies perhaps in a piece of information recently unveiled, but that has gone relatively unnoticed: About 74% of the 45 million mt of targeted capacity were no longer in production to begin with, China Iron & Steel Association party secretary Liu Zhenjiang was reported by Economic Information Daily as saying at a recent seminar.

Other Chinese media have meanwhile reported that actual capacity reductions this year will be closer to 70 million mt. While it wasn’t revealed how much of that comprised idled capacity, the impressive figure — close to half of the 150 million mt in total steel capacity that the nation is aiming to weed out over the 13th Five-Year Plan (2016-2020) — isn’t surprising. Provincial and local government officials stand a higher chance of getting promoted by exceeding targets, and the removal of capacity that had already been closed represents low-hanging fruit.

Among the most prominent wins so far can be seen in the mega-relocation of ten steelmakers within Tangshan city’s Fengnan district to a coastal, greenfield site, that will see not only a net reduction of 4 million mt in capacity, but fulfil other aspects of supply-side reforms like industry consolidation and, ...