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Recent Chinese government steel industry plans and policies
publisherStephy
time2016/12/02
- In part a function of the "new normal" of lower Chinese economic growth and in part a consequence of the transition in the makeup of that growth, market conditions for domestic Chinese steelmakers have become much more severe. Plagued by overcapacity, domestic mills have seen this expressed in key financial metrics.
Recently announced policy initiatives
In the past few weeks, the following policies or pre-warning of imminent policy changes have been announced:
1. The "Transformation Development Plan for Steel Industry 2015-2017" to be published soon by the Ministry of Industry and Information Technology (MIIT).
Key targets are:
- To eliminate 80 Mt/y steel capacity in three years;
- Encourage mergers and acquisitions and to reduce the number of steelmakers from the current 500 to around 300
- To ensure zero growth in energy consumption and further reduce overall emissions.
2. A campaign to identify and close illegal steel operations
In 2015, the MIIT will conduct a specific campaign to identify and close illegal steel operations: that is, those that do not pay taxes, including induction furnace operators, by actions which include:
- publishing a list of such producers - "naming and shaming";
- cutting off power supplies;
- withdrawing business licenses.
Although the timing of these actions country-wide has not yet been revealed, we have already seen that Mianyang city in the Sichuan province initiated actions in early April in order to restrict the operation of induction furnaces.
3. Implementation of differential electricity costs
Effective from 01 April 2015, the Hebei government now has a differential electricity price regime for consumers in the province: the tariff for blast furnaces below 450 m3 and basic oxygen furnaces below 40 t is RMB0.4/kWh, twice the normal level of RMB0.2/kWh.