China releases steel capacity swap policy

China’s Ministry of Industry and Information Technology (MIIT) has released the implementing measures of capacity replacement for the steel industry, which laid out stricter rules than its previous version that expired on December 31 last year.

Effective January 1, the new measure requires the capacity replacement in Beijing, Tianjin, Hebei province, Shanghai, Jiangsu province, Zhejiang province and nine cities in Guangdong province to keep the ratio at a level of 1.25:1 or more. Other regions would see the ratio become higher than 1:1, effectively reducing capacity.

While a steelmaker can replace its converter capacity into EAF capacity at a 1:1 ratio, it is required to exit its sintering and coking facilities.

In addition, the measure standardises the calculations on carbon steel and special steel capacity conversion. It also reduces the capacity calculation on EAFs to be in line with those that use scrap 100% as raw materials.  

The regions that have not met their respective capacity control target would not be able to receive the replaced capacity from other areas, the measure noted.

As with the previous policy, the capacity replacement would not include those on the de-capacity list, the exiting capacity that enjoyed cash and policy support, “ditiao steel”, backward capacity, capacity whose main bodies have been dismantled before applying for replacement and cast facilities that do not belong to iron and steel smelting units.

Ditiao steel is a Chinese name for low-quality steel produced in intermediate frequency furnaces with steel scrap as raw material, as well as rolled steel products with such steel as raw material. 

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