Oversupply forces Chinese steelmakers to react

The company has developed a type of steel called ultrafort steel that is thinner, lighter and stronger than traditional steel. A vehicle made out of ultrafort steel can travel farther on less gasoline while remaining safe to drive.

However, He said high-tech steel products that were once considered to have high value, such as ship sheet, auto sheet, steel tubing and silicon steel, are also in a state of oversupply due to excessive investment and fierce competition.

Wang Yifang, chairman of the Hebei Iron and Steel Group the group has worked to fine-tune its management to reduce costs.

The group is China's largest crude steel producer, with over 69.2 million tonnes of crude steel produced last year, or 10 percent of the country's total.

Xu Kuangdi, director of the Chinese Society for Metals, said the oversupply problem may take at least five to 10 years to be solved.

He said at an academic conference held in early June that the U.S., Europe and Japan have also had oversupply problems in the past.

A study by the EU showed that the steel sector usually enters a state of oversupply after a period of high-speed economic growth.

The EU spent about 20 years solving the problem, according to Xu.

"Chinese steelmakers should learn lessons from companies in other countries," he said.

The government has also been advised to utilize legal or market means to help tackle oversupply.

Zhu Junhong, president of information provider MySteel, said the government should strengthen control over the industry through environmental protection regulations, taxation and credit controls.

Zhu also advised the government to offer subsidies to companies that cut production capacity and help laid-off employees find new places to work.