Total crude steel output in the first five months of 2016 fell by 2% from the same period last year. Total crude steel production stood at 659.9 million metric tons in the first months of 2016, a slight decline from the 673.2 mmt in 2015, according to latest data from the World Steel Association.

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China also missed its goal to reduce steel production in the first half, achieving only a third of what it promised.

Baosteel and Wuhan’s Troubled Merger

Listed units of Baosteel Group, the second-largest Chinese steelmaker, and Wuhan Iron and Steel Group, the sixth-largest, said in separate stock exchange announcements on June 26 that they are planning on restructuring together.

While the two state-owned enterprises didn’t provide any details on what that entailed, industry experts say one possibility is that Baosteel may have been ordered by Beijing to take over all or a majority of Wuhan Steel amid a broader push to reduce the number of state-owned enterprises.

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The way in which the restructuring is done will be a major indication of how the government plans to transform other smoke-stack sectors of the economy where SOEs dominate. Investors will, in particular, be watching whether Baosteel is allowed to shutter much of the high-cost production at Wuhan Steel or whether profits have to be sacrificed to jobs retention as the government seeks to avoid any threat to social stability.