In a recently held conference by China’s NDRC (National Development and Reform Commission) to discuss the performance of country’s supply-side reforms, the commission pointed out that in first seven months of 2018 (Jan to Jul) China has successfully cut its steel capacity by 24.7 MnT which is 80% of its annual capacity cut target of 30 MnT. Following are the key highlights of the discussion that took place at the conference:
Major work undertaken this year
1. Government constantly pushed for its iron and steel de-capacity plan. According to the government work report, China has planned to cut its crude steel capacity by 30 MnT and coal capacity by 80 MnT in 2018 and has achieved 80% and 50% of its target respectively.
2. Strengthened the supervision and inspection of all the capacity cut instructions, avoided recovery of substandard steel and strictly forbade any addition of illegal capacity.
3. Dissolved excess steel capacity and undertake the special investigation of substandard steel.
4. Strengthened international exchange and cooperation to cut steel overcapacity, which attracted attention from both home and abroad.
Major results achieved over the past few years
China’s 13th Five-year plan aims at cutting steel capacity by 100-150 MnT starting from 2016 – 2020. While over 65 MnT steel capacity was cut in 2016 and 55 MnT in 2017, about 80% of the total target of 150 MnT has been achieved in just two years. More than 100 MnT of substandard steel had been eliminated in 2017, effectively purifying the market environment. Also, crude steel capacity utilization improved substantially to a reasonable range.
However, according to NDRC’s top official, although country is successfully able to achieve 80% (24.7 MnT) of its current year target of steel de-capacity, given the improvement in country’s steel demand and rebound in domestic steel prices, some steel enterprises in China have changed their capacity cut targets as their enthusiasm for capacity reduction has declined.
Next plan of action
NDRC has mentioned four tasks in the priority list of its structural plan which are as follows:
• Settling zombie companies
• Cultivating high-quality productivity
• Accelerating technological progress
• Promoting merger and reorganization in China’s domestic steel sector
The government will also continue to cut outdated and substandard production capacity but move to balance efforts between reducing overcapacity, ensuring supply, and stabilizing steel prices.
Leave a Reply