“The point of steel capacity relocation via the ‘old-for-new’ capacity swap is to minimize pollution and preserve the environment,” according to Lv Guixin, a senior Raw Material Dept official with the Ministry of Industry and Information Technology (MIIT). “And relocation is not equivalent to moving to coastal areas; it should be case by case,” he shared with Mysteel Global on the sidelines of the forum.
To prevent steel capacity expansion, Beijing nowadays only allow domestic steel mills to install new iron or steelmaking facilities by scrapping their own existing capacities of the same or larger volume or acquiring capacity quotas that are to be erased from other mills, as Mysteel Global reported.
“Steel facilities that are benefiting local economies and are needed locally should be relocated within the jurisdiction, while some regions – where a serious excess in steel capacity already exists – should plan on moving extra capacities out of the region,” Lv said at the conference.
Hebei province, China’s largest steelmaking province, for example, produced 237 million tonnes of crude steel or over 290 million tonnes of finished steel last year, whereas the local steel consumption only amounted to around 60 million tonnes, according to him.
In the past couple of years, Beijing has emphasizing the importance of moving steelworks from urban and inland areas to coastal regions to facilitate logistics and reduce air pollution, however, the general principle should not be implemented without any revision, Lv clarified.
Other than the lack of rationality in relocating steel capacities, some steel mills, when drafting their relocation plans, are juggling the figures in the old-for-new steel capacity swap and thus leading to possible unwanted capacity expansion, and such games should be checked and stopped, he told Mysteel Global.
Some old steel capacity quotas offered for sale through open auctions should have been categorized as outdated and disqualified tonnage in the first place and therefore, should not be allowed to be offered for sale, Lv remarked. But as guidance in the aspect has been missing, this is becoming a loophole and risks expanding steel capacity through this, he added.
He Wenbo, secretary general of the China Iron & Steel Association (CISA), shared similar concerns when speaking at the forum on December 15.
“Stringent control over capacity expansion via the replacement of induction furnaces with electric arc furnaces should be in place over time, and China should stick to the plan to eliminate all the induction furnaces for stainless steel production by June 2020,” he said.
Besides, capacity swaps within a certain jurisdiction in the name of relocation simply from the urban to coastal area are unnecessary and should be avoided, he pointed out.
“Steel capacity swaps and relocation are to upgrade and optimize the steel industry, not simply to move (facilities) from one location to another, and some local authorities – out of concern for local fiscal income and GDP – would rather the relocation be executed within their own jurisdiction. This should not be encouraged either,” he added.
A series of ongoing capacity swaps and relocation projects should be reviewed, and those that are either problematic or of uncertain merits may be halted, if necessary, to be reviewed thoroughly, He said.
Over 2016-2018, China eliminated 150 million tonnes/year excess steel capacity and 140 million t/y sub-quality induction furnace capacities, as reported, and Beijing has been reiterating the importance of safeguarding the achievement in battling against steel overcapacity in the Chinese market.
According to the forum speakers, for 2019 China’s crude steel output is expected to rise further to around 980-990 million tonnes, as against 928 million tonnes for 2018, and MIIT, together with other governing bodies and CISA, are in the process of thoroughly understanding China’s real crude steel capacity nationwide, as Mysteel Global reported.
Written by Hongmei Li, firstname.lastname@example.org
Edited by Russ McCulloch, email@example.com