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China aims to tear down obsolete steel plants

Keywords: Tags  China steel, Ministry of Industry and Information Technology, MIIT, obsolete capacity

SHANGHAI — China’s Ministry of Industry and Information Technology (MIIT) aims to shut down nearly 9.75 million tonnes of obsolete iron and steelmaking capacity by the end of September and dismantle the facilities entirely by the end of this year.

A list of outdated facilities to be phased out this year in 19 industries, including iron and steelmaking, was published on the ministry’s website late July 25.

A total of 24 steelmakers have been instructed to phase out a combined 6.98 million tonnes of obsolete capacity, while nine iron works have been told to shut down 2.77 million tonnes. Eastern China’s Shandong province accounts for the bulk of the outdated capacity to be shut down at 2.28 million tonnes, or 23.4 percent of the total.

"The listed capacity is only a very small part of all the outdated iron and steelmaking capacity in the province. Mills will just replace the obsolete facilities with larger ones, so the overall capacity will continue to increase and weigh on prices in the long term," a Shandong-based market observer said.

A Beijing-based analyst said that many mills on the list had already suspended production at the facilities or idled them, so the impact on the steel market could be limited.

"The capacity closure is too small compared with the capacity expansion in the country’s steel industry," a Jiangsu mill source said.

A ministry official acknowledged that there is still a long way to go in phasing out outdated capacity, but said the ministry is working to solve the problem step by step. "We will release a second list later this year, hopefully in September," he told AMM sister publication Steel First.

MIIT announced in April that it planned to phase out 2.63 million tonnes of ironmaking capacity and 7.81 million tonnes of steelmaking capacity in 2013.

A version of this article was first published by AMM sister publciation Steel First.

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