China to Ramp-up Efforts to Curb Substandard Steel Production

According to the latest reports, key industry officials of CISA (China Iron and Steel Association) in its annual midyear convention has highlighted that China’s is set to increase its efforts to keep in check the unwanted, polluting and substandard steel output in order to contain risks from excess capacity and promote high quality development in the steel industry.

As China’s campaign to cut overcapacity becomes more stringent which will increase sector’s profitability, the risk of new illegal capacity has also surged as some Chinese companies play tricks to build new capacity, and the production of substandard steel reoccurs as quoted by Wang Wei, head of the raw material department of the Ministry of Industry and Information Technology.

China has been following production cuts over the past two years in order to control overcapacity. The country has pre-achieved its target set by the 13th Five-Year Plan (2016-20) by reducing 150 MnT of crude steel capacity and has removed 140 MnT of substandard steel capacity, according to Wang.

Now to keep a check on substandard steel production units, an inspection panel, co-organized by the ministry and the National Development and Reform Commission (NDRC), will soon start their inspection tour during the third quarter. Substandard steel production and violations of related rules and laws when conducting capacity replacement projects will be the focus of the panel’s inspection, and they will serve as warnings to anyone who attempts to increase new capacity illegally, Mr. Wang said.

He Wenbo, the executive vice-chairman of the CISA, said that to maintain the progress in cutting overcapacity, it is important to improve the layout of steel capacity on a national level, instead of just within a province, a city, or even a county. He suggested measures to encourage competent steel companies to conduct mergers and acquisitions across cities, provinces and even regions, in order to efficiently cut capacity and enhance the national steel capacity layout.

He also suggested that it is important to evaluate the actual results of capacity replacement projects, to ensure removed old capacity outstrips new capacity, saying that construction of new capacity must be strictly regulated. In the fast half of 2019, China produced 492 million tons of crude steel and 587 million tons of steel products, with year-on-year increases of 9.9 percent and 11.4 percent respectively, figures from the CISA showed.