Posted on 28 Mar 2023
While continuing to encourage steel enterprises to pursue merger and acquisition activities this year, China's central government will at the same time safeguard that steel capacity 'swap' guidelines are strictly adhered to, according to Zhang Haideng, deputy director general of the raw materials industry department of China's Ministry of Industry and Information Technology (MIIT).
Addressing delegates attending the 14th China Iron and Steel Development Forum in Beijing on March 25, Zhang warned that the risk of overcapacity in China's steel industry still exists. "We must ensure that capacity swap guidelines for steel enterprises are rigorously followed and close controls placed on new steel capacity," he emphasized.
Zhang was referring to the scheme China introduced many years ago under which steel enterprises wishing to build new iron- or steelmaking capacity must stop and eventually scrap existing facilities of at least the same productive capacity in operation at the time.
The scheme has served as an effective tool for the central government to limit the expansion of the country's steel capacity, as Mysteel Global reported, and is credited with enabling China to permanently remove over 200 million tonnes/year of outdated iron and steel capacity over 2016-2020. New guidelines took effect on June 1 2021, as reported.
At Saturday's conference, Zhang said that steel enterprises are also encouraged to reach higher levels of development through M&A deals with counterparts, arguing that the steel industry's low concentration ratio will lead to excessive competition and raise the risk of "price wars" erupting.
"We will do more research on steel capacity swaps and steel enterprise management (to) provide greater support to steelmakers," he said in his speech.
'Green' development is also a key field for the steel industry, Zhang remarked, advocating that Chinese steel companies participate in "new battlefields" such as the national carbon emission trading market, and keep an eye on innovative technology and equipment to face new challenges in the industry.
China saw its crude steel output slip by 3% on year to 1.03 billion in 2021, the first decline in output since 2015, according to data released by the country's National Bureau of Statistics (NBS).
This downward trend in crude steel output continued last year, with the country posting a 2.1% on-year decline to total 1.01 billion tonnes, the NBS's data showed.
Source:Mysteel Global
