- China plans stricter steel rules to curb overcapacity and boost sustainability.
- New steel projects are restricted outside the Yangtze River economic belt industrial zones.
- Draft promotes low-carbon tech, hydrogen metallurgy, and electric-arc furnace use.
China's leading industry authority has proposed stricter regulations to limit steel production capacity and encourage more environmentally friendly manufacturing practices. The draft regulation recently issued by the Ministry of Industry and Information Technology would prohibit new steel projects outside designated industrial parks in the Yangtze River economic belt and limit capacity transfers in critical areas.
The suggested regulations indicate Beijing's refreshed effort to stop a rebound of overcapacity and speed up the industry's green shift. According to the proposal, important areas with stringent environmental targets would be prohibited from raising overall steel production capacity.
Furthermore, transferring capacity from non-key areas to key regions, or among key regions, would be expressly forbidden. Provinces and cities with national capacity control objectives would likewise be prohibited from receiving capacity moved from other locations.
Additionally, only the smelting facilities included in the official de-capacity plans from 2016 are permissible for capacity replacement. Six categories of capacity are excluded, which encompass obsolete or subsidized capacity that was previously set for removal, equipment that has not been constructed, and unapproved auxiliary smelting facilities such as induction furnaces or vanadium converters.
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The proposed regulations also increased the minimum replacement ratios, mandating that at least 1.5 tons of capacity be retired for each ton added. For mergers and acquisitions finalized after June 2021, the ratio must not be less than 1.25 to 1. Three categories of projects - on-site enhancements, premium specialty steel employing advanced smelting techniques, and initiatives in Qinghai province and the Xizang autonomous region- would be eligible for equal-capacity exchanges.
The proposed draft regulations suggest making merger conditions stricter for companies wanting favorable replacement ratios, necessitating significant integration of ownership, management, and operations. The MIIT announced it would motivate steel producers to increase electric-arc furnace capacity, advance hydrogen metallurgy, and upgrade current facilities with low-carbon technologies, as part of China's wider initiative to make its heavy industries more sustainable and enforce stricter control over steel production.