Capacity replacement measures for ferrous industry to be in place from June 1

SHANGHAI, May 10 (SMM) — The Ministry of Industry and Information Technology issued the revised "Implementation Measures for Capacity Replacement in the Iron and Steel Industry” on May 6, which will come into force on June 1, 2021.

What type of capacity can be used for replacement?

The provincial people's governments and the State-owned Assets Supervision and Administration Commission of the State Council reported to the State Council the implementation plan of capacity reduction in 2016, which listed the list of smelting equipment and corresponding capacity of existing steel enterprises in the region. The production capacity in the filing list and the legally compliant production capacity built in 2016 and later can be used for replacement, and the production capacity not in the filing list shall not be used for replacement. At the same time, for the capacity range that cannot be used for replacement, based on the original "1 required, 6 not allowed" (that is, the smelting equipment used for capacity replacement must be in the filing list, and six types of situations cannot be used for replacement), "unreorganised or unliquidated 'zombie company' production capacity" and "ferroalloy production capacity" are included in the capacity range that cannot be used for replacement.

What must the capacity replacement plan include?

Firstly, the public announcement of supporting facilities has been added, that is, the model, quantity and production capacity of pre treatment and refining facilities must be publicized and announced together for construction projects. Refining facilities include supporting de-phosphorization and desulfurization pre treatment equipment, LF furnace, RH furnace, etc. The second plan is to fully retain the exit project information including the area where the exit project is located, the name of the company, the model, quantity and capacity of the smelting equipment exited, as well as the dismantling schedule, etc. When it involves cross-provincial (regional, municipal) capacity replacement, a capacity transfer announcement must be attached. The third plan is to increase the requirement that "the same smelting equipment shall not be split and sold in principle". If it is necessary to split, the reason for the split must be clarified, and no more than two transferees must be made. At the same time, the information of all capacity transferees should be clarified in the capacity transfer announcement and capacity replacement announcement. It is necessary to explain the reason for the temporarily unclear capacity of the transferee.

How to connect the commissioning of new projects and the withdrawal of replacement capacity?

In order to ensure that capacity replacement does not add new steel production capacity, the Measures continue to insist that “the transferor must remove the exit equipment for replacement before the construction project is put into production, and make it unsuitable for resuming production”. At the same time, for the "one furnace with multiple enterprises" situation, it is clear that the time for the construction project to be put into operation is subject to the time of the first completed and put into operation, and the corresponding equipment must be dismantled in place as required.

What are the requirements for capacity replacement?

It is strictly forbidden to increase the total steel production capacity in key areas for the prevention and control of air pollution. Provinces (autonomous regions, municipalities) that have not completed the total steel production capacity control target shall not accept the steel production capacity transferred from other regions. The Yangtze River Economic Belt region prohibits new or expanded steel smelting projects outside the compliance zone.

The replacement ratio in key areas for air pollution prevention and control shall not be less than 1.5:1, and the replacement ratio in other areas shall not be less than 1.25:1. In order to encourage corporate mergers and reorganisations and increase industry concentration, the replacement ratio in key areas for pollution prevention and control can be no less than 1.25:1, and replacement in other areas can be no less than 1.1:1 when the compliant production capacity obtained after the completion of substantive mergers and reorganisations (realising actual holdings and completing legal or legal person affiliation, equity relationships, articles of association, etc.) is used for project construction.

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