In its years-long battle to deal with the problems of overcapacity and rising pollution, China’s top steelmaking province Hebei had announced to slash iron and steel making production capacity by more than 10 MnT each and shut down all the zombie mills this year.
In lines with this production cut plan, Hebei Metallurgical Industry Association (HMIA) has confirmed that the province’s steel industry has recorded a trend of output reduction and efficiency increase since the start of this year. While the output of crude steel and steel products plunged by 7.52 MnT and 4.04 MnT respectively from Jan-May’18, the pig iron production decreased by 13.34 MnT.
Under these circumstances, the whole steel industry in Hebei province was able to maintain good profits. As per HMIA, during Jan-May’18, Hebei’s steel industry has realized a profit of RMB 33.431 billion, a year-on-year increase of 120%. This amount accounts for 35.08% of the Hebei province’s total industrial profits. The main business profit rate was 7.61%, an increase of 3.80 percentage points Y-o-Y basis and the profit per tonne of steel production was RMB 379.60, a year-on-year increase of 38.40%.
From January to May 2018, there were 15 companies with a total profit of more than RMB 900 million in Hebei province, and 15 steel mills with a profit of RMB 500 per tonne.
Hebei’s output cuts in the past
In 2017, the province has shut down 27.54 MnT of steelmaking and 21.32 MnT of ironmaking capacity. During the time period of 2013 to 2017, Hebei has cut 69.93 MnT of its steelmaking capacity and 64.42 MnT of ironmaking capacity.
From 2013 to 2017, 8 out of 11 zombie producers of steel were also cleared from the market, and 31 substandard steelmakers have been dismantled and banned.
Province’s future plans of production cuts
According to the market reports, the Hebei provincial government is moving briskly to cut overcapacity and aims to reduce steel production by 40 MnT over the next three years.
The provincial government has pledged to curb concentrations of hazardous smog particles, known as PM2.5, by 14% by 2020. The region will also strengthen pollution checks and impose tougher punishments on companies and officials for violating regulations, in a further effort to cut pollution and smog.
China as a whole is aiming to cut steel capacity by 100 million to 150 million tonnes over the 2016-2020 period as part of its efforts to reduce supply gluts.
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