[SMM Stainless Steel Flash] China Includes Stainless Steel in Strict Capacity Controls for First Time

Published: May 22, 2026 10:56

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China's MIIT has updated its capacity replacement regulations, bringing stainless steel under full regulatory oversight for the first time. The policy enforces a nationwide 1.5:1 replacement ratio, eliminating regional exemptions, with a 1.25:1 ratio applicable only for mergers. Cross-enterprise capacity trading will be banned after a two-year transition ending in 2028, with future transfers requiring structural acquisitions. Approvals lapse if construction does not begin within 24 months. The rules crack down on illegal induction furnace expansion, targeting the sector's historically sub-75% utilization rate. Output growth is expected to slow to 1–2% annually, driving out inefficient small producers while enabling some major mills to consolidate through reorganization incentives.

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