China extends steel capacity cuts to larger region

China’s environmental protection ministry has set steel capacity reduction targets for the Beijing-Tianjin-Hebei region and its surrounding areas in a bid to improve the country’s air quality.

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This follows a similar plan announced by Hebei province’s local government in the middle of this month, the same day the State Council unveiled a national plan towards the same goal.

Tianjin city and Shandong province, which borders Hebei, were ordered to reduce their steel capacity to 20 million tonnes and 50 million tonnes, respectively, by the end of 2017, the ministry said in a document released on Sunday September 22.

Shanxi province, which lies to the west of Hebei, needs to cut 6.7 million tonnes of capacity by the end of 2017.

“[The plan] is expected since these areas all have large, energy-intensive capacity and are close to Beijing. But the ordered reduction is not very large compared with that of Hebei province [which aims to cut 60 million tonnes of capacity],” an analyst based in the Chinese capital said.

In 2012, Tianjin, Shandong and Shanxi produced 21.24 million tonnes, 59.57 million tonnes and 39.5 million tonnes of crude steel, respectively, according to local data provider Custeel.

In addition to the capacity reduction targets, the Chinese government will also implement stricter regulations for selected industries.

New projects for industries facing overcapacity, including steel, cement, aluminium, flat glass and shipbuilding, will not be approved in the Beijing-Tianjin-Hebei region and its surrounding areas, the ministry said.

It remains to be seen just how effective this new plan is.

“There have been [plans] on a similar topic almost every year, but there are always projects being approved for some reason. Therefore, we will wait and see the actual effect from this one,” Xu Huimin, an aluminium analyst at Huatai Great Wall Futures in Shanghai, said.

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