According to Mr Xiong Bilin with the National Development and Reform Commission on October 19th “About 58 million tonnes of current steel capacities were not approved before kicking off. The amount takes about 30% of the total steel overcapacity and should be eliminated according to the States Council’s regulations.”

The problem of overcapacity is no longer a new phenomenon in China steel industry. In recent years, the country steel capacity swells at the speed of almost 100 million tonnes per year. Among the newly established capacity in each year a large percent of them started to build without approval.

The related data shows that the total Chinese crude steel capacity has now reached to 660 million tonnes, while market demand only posts at 470 millions tonnes resulting in the overcapacity of 190 million tonnes.

Mr Li Jizhong the minister of Industry and Information Technology said that "China now has about 100 million tonnes of backward iron making capacity and about 50 million tonnes of obsolete steel making capacity which if combine with the 58 million tonnes of capacity that were not approved before establishment, the total overcapacity is 108 million tonnes."

NDRC has reiterated to eliminate the backward capacity and balance the market situation in recent years. The commissions propose measures include higher standards for energy consumption, environment protection and industry entrance. However, to eliminate the obsolete capacity can never be an easy task. Especially for that of established capacity, the process will be even more difficult. Some local governments also are reluctant to shut down the steel mills, as steel industry usually is the main source for their tax revenue.

In the beginning of 2007 NDRC singed an agreement with several provincial governments to eliminate the backward capacity however the result turned out to be negative with only 50% of targets were fulfilled.

Officials from NDRC said no pure new steel project will be approved and any project upgrade should be carried out at the condition of eliminating the same amount or even more of backward capacity. The commission said by the end of 2011, all the blast furnace that under 400 cubic meters and converter and electric oven that under 30 tonnes should be closed. The strict scrutiny on rebar and wire rod certificates will also be carried out.

(Sourced from MySteel.net)
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