QINGDAO, China China
should tackle steel overcapacity by giving more incentives to
local governments to rein in new capacity, a Ministry of
Industry and Information Technology official says.
The government should also raise
energy and other costs to discourage new projects, Zhang
Dechen, head of the ministrys raw materials department,
Steel overcapacity has become a
serious problem in China, resulting in frequent bouts of
overproduction that arent justified by steel prices.
Reducing the amount of outdated
capacity should be one criteria used in evaluating the
performance of local governments, Zhang said.
China should also raise the bar
to entry to the sector by placing higher requirements on
environmental protection, product quality, technology and
"Higher costs for electricity,
resource taxes and emissions discharges would act as a market
tool to squeeze some obsolete capacity out of the market,"
Industry consolidation and
development of high-technology steel products should be
promoted, he added.
The industry has expanded partially due to local governments
promoting local projects, as well as a huge number of projects
being constructed without formal approval.
A version of this article was first
published by AMM sister publication Steel