China Imposes Ban on New Steel Capacity Launches in 2018

SEATTLE (Scrap Monster): China-the world’s largest steel producer has vowed to continue its efforts to cut back steel capacity. In a statement issued Thursday by the Ministry of Industry and Information Technology (MIIT), the country’s administration reiterated its commitment to curb excess steel capacity.

The MIIT statement says that the country will strictly ban the launch of new steel capacities in 2018. It would also ensure that all outdated steel capacities will be eliminated. Further, such facilities will not be allowed to reopen. This would help the country achieve its capacity cut targets well ahead of schedule.

The Ministry also noted that it would encourage steel makers to use electric arc furnace (EAF) technology. It must be noted that EAFs generates much lesser pollution when compared with steel making capacities which make use of traditional blast furnaces. Further, these capacities make use of recycled steel scrap instead of iron ore as the raw material for steel production. It must be noted that the country has been in effort to boost domestic scrap collection for the past several months now. The new move is expected to increase the domestic demand for locally procured scrap.

The country had recently enacted policies to ease the permit and approval process for EAF capacities. As a result, many such new facilities are expected to come online during 2018, MIIT statement said.

The new move by the Ministry is in line with the country’s anti-pollution campaign. Incidentally, China aims to eliminate up to 150 million tonnes of steel making capacities during 2016-’20. The country has phased out approximately 115 million tonnes of steel capacity in 2016. It had met the cutback target of 50 million tonnes in 2017. The new move by the MIIT may help the country achieve the target ahead of schedule in 2018.

However, despite production cuts, the country’s steel output is expected to touch new heights in 2017. The cumulative production during the first eleven months of 2017 totaled 764.8 million tonnes (Mt). The rise in production is mainly on account of mills ramping up their production to take maximum advantage of higher steel prices. China had emerged as the world leader in crude steel production in 2016 with a production of 808.4 Mt.