Leading commodity research company Roskill Information Services Ltd announced that under the guidance of China’s 14th five year plan of 2021-2025, officials in Inner Mongolia have started to impose several measures to develop a greener Chinese ferroalloy and steel industry. To ensure that the energy consumption per unit of GDP will decrease by 3.4% in 2021, an electricity policy to cut supply was issued by Wulanchabu Industrial and Information Technology bureau on 10 January, followed by the Fengzhen government issuing an updated notice for its ferrochrome industry on 23 January to control energy consumption.The resultant furnace regulations includeAll furnaces below 25MVA must be shut down. Producers who produce noble alloys, will have their product reviewed by end-February and be allowed to operate if the required qualifications are metOnly one open or semi-closed furnace above 25MVA can be put into operation by operators, while the rest of the furnaces must be shut down. All open and semi-closed furnaces are required to complete the technological upgrading to closed furnaces, and only qualified furnaces can come back online after they are examined by the government before the end of FebruaryAll furnaces, regardless of size, will be examined according to the energy consumption indicators from Bureau of Statistics at the end of February. Those not meeting the required qualifications will be forced to shut downFengzhen is one of the core areas in Ulanqab in Inner Mongolia for producing high carbon ferrochrome (HC FeCr) in China, with the total capacity accounting for around 30% of Inner Mongolia and 15% of the country. However, nearly half of the area’s furnaces are below 25MVA.At this point, it is not clear if and when this regulation will filter through into the other key ferroalloy producing regions, but for now it is in line with China’s 14th five-year plan (2021-2025) which outlines:Replacing high-speed growth with high-quality growthRebalancing its economy with supply-side structural reformDriving modernization through innovation and technological advancementsPromoting high-end, intelligent, and green productionStructural reforms of smelting furnaces in China have generally moved in tandem with the development of larger, cleaner furnaces. These furnaces also operate at higher efficiency rates and therefore inevitably lead to a net increase in operational capacity.The closure of small and non-closed ferrochrome furnaces in China has already been ongoing, but the decision to close all furnaces up to 25MVA has caught many in the industry off-guard, as the expected closures were thought to coincide with the development of new capacity. All furnaces below 25MVA across China account for about two-thirds of total installed capacity, although this is significantly lower when comparing operational capacity. Nevertheless, available furnaces larger than 25MVA are theoretically capable of accounting for the equivalent volume of China’s total 2019 output level. Therefore, any growth in FeCr supply in China will be underpinned by expansion projects of larger furnaces.