Chinese steel companies increase overcapacity
In fact, China’s government has agreed to reduce overcapacity among steel companies – but, according to a study, they have risen even higher. A new law could turn the trend now.
Global overcapacities have been causing problems for the steel industry for a long time. The steel cookers in China are not completely uninvolved – and they know that too. But instead of shutting down blast furnaces, which are already outdated, the Chinese leadership is still pushing ahead with the expansion. This is the conclusion of a study by the environmental organization Greenpeace and the consulting firm Custeel.
Production capacity has increased by 36.5 million tonnes in 2016, according to the paper. This is twice as much as the total production of Great Britain. The capacities were extended mainly in three provinces around Beijing and had caused there for high air pollution.
The leadership in Beijing had pledged to curb excessive production by closing down inefficient factories or merging factories. According to Custeel and Greenpeace, capacity has been reduced in some facilities. In return, however, new plants were opened or shut down again put into operation. According to the investigation, closed factories must be demolished to prevent re-commissioning.
“The fact that Chinese crude steel production increased in 2016 reflects that the consolidation of the Chinese steel industry is progressing very slowly,” said Hans Jürgen Kerkhoff, President of the German Steel Federation, the Handelsblatt. The European steel industry has been lamenting dumping imports from China for a long time.
After all, a bill by the Chinese Ministry of the Environment is a serious attempt to deal with the problem. The plan is to cut steel and fertilizer production by at least half and cut aluminum production by at least one-third during the heating season from late November to late February in 28 cities.
The cities targeted by the ministry – including Beijing – are located in the coal and steel areas on the east coast of the country. The regions are densely populated and are particularly hard hit with smog. According to insiders, the ministry has submitted its plans for comment to companies and administrations in the regions. If implemented, the steps would be among the most radical in the smog fight launched three years ago.
The restrictions would reduce Chinese steel production by eight percent and aluminum output by 17 percent annually.
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