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Steel Production in China to be reduced over Next Five Years

Date:27-12-2013

China’s State Council is planning to reduce the steel production capacity in the nation by 80 million metric tons in the next five years. This is aimed at helping the steel industry which is hit hard by unfair competition and also improving the air quality of the country.

Li Xinchuang, the head of China Metallurgical Industry Planning and Research Institute has said that China should refrain from adding any new steel projects for any reason. He also said that the ban was a must to ensure the safety of the environment and to put an end to the unfair competition caused by steel mills which have still not installed emission-reduction equipment.

To achieve the target, Hebei province in China, which is the largest steel producer in the country, will cut steel capacity by 60 million tons by 2017. This means that around one-third of the Hebei’s steel capacity will be shut down by 2017. The local government stated that its goal is to reduce 15 million tons of crude steel capacity by 2014.

Lu Huaying, an analyst at Lange Steel Information Research Center said that Hebei will cut the power supply to production lines that are marked for shutdown and destroy blast furnaces. This will mean that steel companies cannot put the blast furnaces back in production again.

She also said that the Chinese government has been urging steel companies to cut emissions and save energy for years. However, these temporary measures failed when steel mills started to produce again after authorities’ checks.

Niu Yongzhi, a local official at the Ministry of Industry and Information Technology of Shijiazhuang in Hebei province have said that this decision will affect the economic performance of the country in coming years, but in the long run it will be beneficial to the public. He said that the government treats all companies equally, whether they are private or State-owned. If companies don’t meet environmental protection standards, they will be shut down.

China's steel industry entered into a period of rapid development, when China decided to invest 4 trillion yuan ($658 billion) to improve the economy in 2008. In 2012, steel production capacity in the country increased to almost 1 billion tons. However, to solve the overcapacity problem it is necessary to reduce the steel production capacity.

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