China's iron and steel industry is looking down the abyss. Plagued by over-capacity and high competition, profits have plunged. And this situation is not likely to change anytime soon. Steel companies in China enjoy huge subsidies from local governments, whose main focus is to meet job and growth targets. Encouraged by easy financing and cheap energy supplies, the country has steadily built more steel mills than needed. Currently, the world's second-largest economy has about 300 m metric tons of excess steel capacity, equivalent to nearly twice the steel output of the whole European Union last year. According to China Iron & Steel Association (CISA), overcapacity in the sector is unlikely to reduce anytime soon and that the sector was facing an extremely complicated situation as a result of slowing growth, structural adjustments in the economy and policies to close old capacity.