After nearly one and a half years of long wait, China’s Ministry of Industry and Information (MIIT), the governing body of the domestic steel industry, released the updated detailed guidelines regarding the old-for-new steel capacity swaps in China on May 6, and it will take effect on June 1 nationwide.
The guidelines, thus, will be replacing the earlier version that took effect since the start of 2018 but then had been shelved since January 2020 because of the loopholes and defects that had been detected in the actual execution, and the ministry has since then been working on an updated version, Mysteel Global notes.
The latest version is expected to have exhausted all the major and possible swap scenarios involving either ironmaking or steelmaking facilities, and it will be retrospective to all the capacity swap proposals that have not been through the procedure of seeking public review and feedbacks by January 24 2020, MIIT stated in an explanatory post.
MIIT shared in the explanatory notes that perfecting the capacity swap guidelines will be more effectively and efficiently deal with overcapacity, industrial and steel structure optimization, M&As, facilities upgrading and energy saving and emission reduction.
The latest guidelines are also expected to effectively prevent the recurrence of higher new steel capacities through swaps instead of keeping the capacity flat or lower than the quotas.
The 12-page new code of conduct is almost identical with a draft version that the ministry shared for public reviews and feedbacks in December 2020, Mysteel Global compared the detailed items. (Our report on the December draft can be accessed via: https://www.mysteel.net/article/5020304/China-issues-revised-steel-capacity-swap-guidance-draft.html).
The swap ratio for blast furnaces for areas that are susceptible to atmospheric pollution, thus, have remained the same at 1.5:1, that for other areas at 1.25:1, and the ratio for erection of new electric arc furnaces also stayed unchanged at 1:1.
Some minor revisions have been done in the latest version, such as that the old iron or steelmaking capacities can be split among “two” enterprises instead of “three”, which is to minimize the possibility of double counting the same old capacity by making it easier for related regulatory bodies to trace the use of the old capacity quotas, Mysteel Global noted.
Besides, MIIT has standardize the old capacity evaluation system, which will rule out some mills’ attempts to “play with numbers” or to submit misinformation regarding the capacities.
MIIT has also set up a more comprehensive monitoring scheme to closely track the execution of the swap proposals and to guarantee that all the old facilities are really shut down and dismantled as agreed before the new capacities are commissioned, and those zombie enterprises stand no chances of reincarnation by any means or in any forms.
Written by Olivia Zhang, zhangwd@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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