China's blast furnace capacity will increase by 6.92 million mt in 2020, new version of capacity replacement measures to be introduced at the year-end

SHANGHAI, Dec 9 (SMM) — The production capacity put into operation in 2020 is far less than the expected 100 million mt of capacity due to COVID-19 and capacity replacement policy. 46.99 million mt of blast furnace capacity is expected to come online in 2020, and 40.07 million mt will be eliminated, with a net increase of 6.96 million mt. Some of the capacity was eliminated at end 2019, and part of the capacity is expected to be phased out in 2021.  Meanwhile, some steel projects have been approved in the past but have not been built, such as the Fangchenggang project of Liuzhou Iron and Steel. For 2020, this part of ironmaking capacity is new capacity. The new capacity tracked by SMM includes the resumption of production at a steel mill that has been suspended for more than two years. In October 2020, a 1,800 m³ blast furnace was resumed, involving a capacity of 1.53 million mt. This accounts for high iron ore prices in 2020.

The amount of blast furnace capacity eliminated from January to October is greater than the amount put into production, while the commissioned capacity between  November and December is greater than the amount eliminated.

The newly built blast furnace production capacity is concentrated near the ports in Hebei and Guangxi, while the eliminated ones are concentrated in Hebei, Jiangsu and Tianjin.

2020 is the closing year of the 13th Five-Year Plan, and the steel industry has also carried out large-scale capacity replacement; although capacity replacement is reduction replacement, new blast furnaces are usually more efficient and there are some illegal capacity expansions, which leads to higher production capacity. Due to irregularities in replacement, the Ministry of Industry and Information Technology suspended the approval of new capacity replacement projects at the beginning of 2020, and reviewed approved projects.

For more updates on the China iron ore sector, please refer to the latest December edition of the China Iron Ore Monthly Monitor.