Analysis: China to continue steel capacity cuts in 2018

SHANGHAI, Mar 7 (SMM) - China will cut another 30 million mt of steel capacity in 2018 and intensify efforts to liquidate bankruptcies, reorganise so-called ‘zombie firms’, and resettle retrenched workers and debt, Premier Li Keqiang announced at the National People’s Congress on Monday March 5.

China plans to cut steel capacity by 100-150 million mt by 2020, according to the Steel Industry Adjustment and Upgrade Plan for 2016-2020. Over the past two years, 115 million mt of capacity was cut as the government ordered shutdowns of outdated capacity and cleaned up illegal projects. The 2018 target reflects the government’s determination to cut capacity efficiently.

This year, the government is likely to cut capacity through markets and legislations. The Report on the Work of the Government pointed out that China would achieve the target by setting up and enforcing rules for environmental protection, quality and safety.

SMM expects Hebei province to lead with a 10-million-mt capacity cut, and Jiangsu and Shandong to follow with 5 million mt each.

In 2018, Hebei province will continue to play a key role in addressing overcapacity in China. Having fulfilled the target of cutting 21.78 million mt of excess capacity in 2017, Hebei’s 10-million-mt cut this year will account for 33% of the total target. As a heavily polluted region in north China, Hebei has had stricter environmental requirements imposed in order to optimise production capacity and upgrade its equipment.

Ma Zhennian, an officer at the Development and Reform Commission of Hebei, said on March 5 that the 2018 government work report has pointed out the way forward for the province, and its steel industry will focus on the following six aspects this year.

- Continue to address overcapacity by eliminating substandard steel and ‘zombie’ firms

- Build a green supply chain for the steel industry with a focus on low-carbon development and reduced emission

- Deepen reforms and encourage technical innovation

- Take advantage of new opportunities created by the One Belt One Road initiatives

- Ensure a safe environment for production

- Serve the government and member companies

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