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China plans to resolve steel industry overcapacity by 2017
Add Time：2015-03-22 22:36:00 Clicks：
Xinhua reported that Chinese government will accelerate the overhaul of its overly invested iron and steel sector to bring it back to a basically balanced level by 2017
China's Ministry of Industry and Information Technology MIIT, in a policy draft published Friday, said it would aim to bring industrial average profit rate and return on assets to a reasonable level, with more than 80% production capacity utilized
Highlights
1. Speed up the merger and acquisition process to create three to five major steel producers by 2025 and will ensure the 10 largest companies account for no less than 60% of total output. The output of the top ten steelmakers was 36.6% of the total in 2014
2. To perfect market access and exit rules to dissolve excessive production
3. Factories' pollutant emission and energy use should be in line with national standards, with the aim that all solid waste will be recycled by 2025
3. Establish more research centers, labs and industrial associations to encourage innovation in the sector
This is the latest move from the government to tackle overcapacity, which has plagued China since the 2008 financial crisis. China produced 823 million tonnes of crude steel last year. China has hundreds of steel mills with a total annual crude steel capacity of about 1.2 billion tonnes, leaving excess capacity at an estimated 300 million tonnes.
As demand continued to shrink and signs of overcapacity became more apparent, the government in 2013 vowed that it would slash production by 80 million tonnes by 2017, roughly equal to the annual output of the United States, the world's third largest producer. In 2014, 31.1 million tonnes of steel smelting capacity was eliminated.
An economic slowdown and chronic overcapacity have driven down steel prices to nearly 20-year lows, and saddled many steel mills with big losses.
The government has been at pains to digest production gluts in "favored" sectors, including steel, caused by rapid expansion with little regard for real market demand. The once-overheated sector is now undergoing a bitter winter, with many small steel makers filing for bankruptcy and some large producers struggling.
China's Ministry of Industry and Information Technology MIIT, in a policy draft published Friday, said it would aim to bring industrial average profit rate and return on assets to a reasonable level, with more than 80% production capacity utilized
Highlights
1. Speed up the merger and acquisition process to create three to five major steel producers by 2025 and will ensure the 10 largest companies account for no less than 60% of total output. The output of the top ten steelmakers was 36.6% of the total in 2014
2. To perfect market access and exit rules to dissolve excessive production
3. Factories' pollutant emission and energy use should be in line with national standards, with the aim that all solid waste will be recycled by 2025
3. Establish more research centers, labs and industrial associations to encourage innovation in the sector
This is the latest move from the government to tackle overcapacity, which has plagued China since the 2008 financial crisis. China produced 823 million tonnes of crude steel last year. China has hundreds of steel mills with a total annual crude steel capacity of about 1.2 billion tonnes, leaving excess capacity at an estimated 300 million tonnes.
As demand continued to shrink and signs of overcapacity became more apparent, the government in 2013 vowed that it would slash production by 80 million tonnes by 2017, roughly equal to the annual output of the United States, the world's third largest producer. In 2014, 31.1 million tonnes of steel smelting capacity was eliminated.
An economic slowdown and chronic overcapacity have driven down steel prices to nearly 20-year lows, and saddled many steel mills with big losses.
The government has been at pains to digest production gluts in "favored" sectors, including steel, caused by rapid expansion with little regard for real market demand. The once-overheated sector is now undergoing a bitter winter, with many small steel makers filing for bankruptcy and some large producers struggling.