China plans to tighten steel capacity swap ratio, encourage more mergers

China is taking a tougher stance on steel capacity swaps in a bid to control pollution emissions from its mammoth steelmaking industry and alleviate oversupply.

Its Ministry of Industry & Information Technology (MIIT) released a draft last week to seek feedback from steel industry sources on increasing the steel capacity swap ratio to 1.5:1 from 1.25:1.

This means that a steelmaker will need to cut old capacity by 1.5 units for each unit of new capacity, or 1.5 million tonnes per year of old capacity for 1 million tpy of new capacity.

The more stringent capacity swap ratio of 1.5:1 will apply to cities which typically record heavy air pollution, such as such as Beijing, Tianjin, Hebei, Shandong and Shanxi provinces in north China.

Other areas with better air quality will be allowed to continue to use a swap ratio of 1.25:1, the draft said.

Steel mills which have completed mergers and re-organizations will be also be able to follow the 1.25:1 capacity swap ratio, the draft document said.

More room for EAFs
Steelmakers which want to use electric-arc furnaces (EAF) in their steelmaking process will not need to follow the 1.25:1 or 1.5:1 capacity swap ratios.

“Older equipment which were used to support converters and basic oxygen furnaces can be replaced by EAFs on a 1:1 ratio,” the document said.

EAFs which are to replace old EAFs and non-blast-furnace iron making facilities such as Corex, Finex, Hismelt as well as stainless steel capacity using RKEF+AOD production lines, will also fall under this category.

The existing ratio of 1-1.25:1 steel capacity swap ratios came into effect in 2016 as part of China’s efforts to reduce steel overcapacity and oversupply.

What to read next
After a one-month consultation period, Fastmarkets has amended the frequency of its price assessments for MB-MAG-0005 Magnesia, dead burned, 97.5% MgO, lump, fob China, MB-MAG-0002 Magnesia, dead burned, 90% MgO, lump, fob China, MB-MAG-0009 Magnesia, fused, 97% MgO, Ca:Si 2:1, lump, fob China, and MB-MAG-0007 Magnesia, fused, 98% MgO, lump, fob China, to monthly from […]
Brazil could reach a share of as much as 7 million tonnes per year in China's distillers dried grains (DDG) and distillers dried grains with soluble (DDGS) markets following an agreement between the two countries that allows Brazilian exports, according to the National Union of Corn Ethanol (Unem).
Fastmarkets' Tina Tong discusses adopting ESG practices for a sustainable ferro-alloys future
The recent US-China agreement to temporarily reduce tariffs is a major step for global trade, with tariffs on US goods entering China dropping from 125% to 10% and on Chinese goods entering the US decreasing from 145% to 30% starting May 14. While this has boosted markets and created optimism, key industries like autos and steel remain affected, leaving businesses waiting for clearer long-term trade policies.
BEK pulp prices in Europe dropped $40/tonne in April, driven by US import tariff uncertainties and weaker demand in China.
The US-China trade truce announced on May 12 has brought cautious optimism to China’s non-ferrous metals markets, signaling a possible shift in global trade. Starting May 14, the removal of additional tariffs has impacted sectors like battery raw materials, minor metals and base metals such as zinc and nickel, with mixed reactions. While the improved sentiment has lifted futures prices and trade activity, the long-term effects remain unclear due to challenges like supply-demand pressures and export controls.