China to Tighten Steel Mill Capacity Swap Rules
China is considering tighter controls over steel capacity swaps, including further reducing production quotas, to prevent newly built mills impeding the country’s long-running battle against overcapacity. China’s Ministry of Industry and Information Technology has issued a draft plan aiming to further control new capacity in the bloated steel industry. Measures for the implementation of capacity replacement in the Chinese steel industry include Beijing, Tianjin, Hebei Province, the Yangtze River Delta area, Pearl River Delta, the Fen-wei plains and other key cities in Hebei, Henan, Shanxi and Shandong Province, will not be able to replace their old steel capacities as previously, while the new rules are stricter. In particular, mills in these areas will be able to add capacities only in the proportion of 1.5:1, while previously the proportion was 1.25:1. In cases of mergers and acquisitions, the replacement ratio will be still 1.25 in the mentioned areas.
The rule that companies switching to more eco-friendly production, from BFs/BOFs to EAFs, will remain the same as previously they will be able to replace capacities in the proportion of 1:1.
This followed a notice by the ministry in January that suspended capacity swaps and urged local governments to investigate existing projects.
Source - Strategic Research Institute