(Yicai Global) Jan. 11 -- Although its 2016 steel de-capacity target is already overfulfilled, China is not relaxing its overcapacity elimination initiative. Rather, it is intensifying its efforts to suppress illegal capacity, especially of ferrous waste fabricated steel.
"Nine out of 10 ferrous waste fabricated steel producers are equipped with no refining facilities, so they must close," said Xu Lejiang, vice minister of the Ministry of Industry and Information Technology of China (MIIT), at the 2017 China Iron and Steel Industry Association Board (enlarged) Meeting on Jan. 10. Deputy Director Lin Nianxiu of the National Development and Reform Commission (NDRC) scheduled the elimination of ferrous waste fabricated steel at the meeting, fixing it for before June 30, 2017. The relevant inspectorate has started its work.
At the same time, heavy smog may force steel production to shut down completely in Langfang, Baoding and Zhangjiakou -- three Beijing satellite cities. Experts believe the steel, cement and chemical enterprises clustered in the Beijing-Tianjin-Hebei region produce a large amount of particulate matter 2.5 (PM2.5). Hebei, which hosts many steel enterprises, faces ever-greater challenges from haze.
The Hebei Development and Reform Commission last year began accelerating its transformation of the provincial cities of Zhangjiakou, Chengde, Qinhuangdao and Baoding into basically coal-free cities. Zhangjiakou, Baoding and Langfang will research and develop a steel-production exit plan, Hu Yanping, vice president of China United Steel Group, told Yicai Global.
People's Daily earlier reported that, during the '13th Five-Year Plan' period, Zhangjiakou, Baoding and Langfang will completely phase out steel production, while Qinhuangdao and Chengde will slash 50 percent of theirs. Mills in and around other cities should also shut down or gradually move to industrial parks or coastal cities.
However, Liu Bin, a researcher at market researcher Shanghai Ganglian E-Commerce Holdings Co. told Yicai Global that the government has yet to issue direct policies to channel steel production capacity out of Zhangjiakou, Baoding and Langfang. Li Xinchuang, dean of the China Metallurgical Industry Planning and Research Institute, also disclaimed any knowledge of specific measures.
Ferrous waste fabricated steel is made from molten iron and steel scrap in induction furnaces or similar facilities, and used as a component in rolled steel. The ingredients and quality of the steel cannot be effectively controlled. The diameter, tensile strength and other indexes of the fabricated steel hardly meet relevant national standards. Most such products are susceptible to brittle failure and thus serious quality risks lurk within it.