He­bei faces huge cuts in steel ca­pac­ity to re­duce pol­lu­tion

Prov­ince to re­duce em­pha­sis on lo­cal eco­nomic growth

China Daily (Hong Kong) - - BUSINESS INTERNATIONAL - By DU JUAN in Bei­jing and ZHENG JINRAN in Shi­ji­azhuang

China’s largest steel base, He­bei prov­ince, will cut 67.26 mil­lion met­ric tons of ca­pac­ity by 2017 with­out putting too much em­pha­sis on lo­cal growth in gross do­mes­tic prod­uct in or­der to cre­ate a sus­tain­able de­vel­op­ment of the in­dus­try and im­prove air qual­ity.

“We should not pur­sue eco­nomic growth un­der the cur­rent in­dus­trial struc­ture be­cause of its high en­ergy use and en­vi­ron­men­tal cost,” said Zhou Ben­shun, sec­re­tary of the Com­mu­nist Party of China He­bei Pro­vin­cial Com­mit­tee.

“It’s time to make changes,” he added.

Heavy in­dus­tries such as iron and steel, ce­ment and glass pro­duc­tion have been pil­lars of He­bei’s econ­omy for years. How­ever, the heavy pol­lu­tion, es­pe­cially lin­ger­ing smog, means the prov­ince will face huge costs to im­prove the en­vi­ron­ment.

Ac­cord­ing to a plan re­leased by the He­bei De­vel­op­ment and Re­form Com­mis­sion, the prov­ince will close 21.5 mil­lion met­ric tons of steel ca­pac­ity an­nu­ally by 2017.

He­bei has the big­gest steel out­put in the coun­try, amount­ing to 180 mil­lion met­ric tons of crude steel in 2012, a quar­ter of the to­tal out­put in China.

The re­duc­tion in over­ca­pac­ity will af­fect He­bei gov­ern­ment’s tax rev­enue of 15.92 bil­lion yuan ($ 2.62 bil­lion) di­rectly, ac­cord­ing to Chen Yongjiu, head of the com­mis­sion.

The prov­ince car­ried out tougher mea­sures to meet the tar­get as­signed by the cen­tral gov­ern­ment, which aims to re­duce 80 mil­lion met­ric tons of steel pro­duc­tion ca­pac­ity within five years na­tion­wide.

The cen­tral gov­ern­ment stip­u­lated in the 12th FiveYear Plan for the steel in­dus­try that blast fur­naces with a ca­pac­ity smaller than 400 cu­bic me­ters and con­vert­ers with a ca­pac­ity smaller than 30 met­ric tons should cut pro­duc­tion or close.

He­bei has pro­posed an even stricter re­quire­ment, say­ing that blast fur­naces with ca­pac­i­ties smaller than 450 cu­bic me­ters while con­vert­ers

We should not pur­sue eco­nomic growth un­der the cur­rent in­dus­trial struc­ture be­cause of its high en­ergy use and en­vi­ron­men­tal cost.” ZHOU BEN­SHUN SEC­RE­TARY OF THE COM­MU­NIST PARTY OF CHINA HE­BEI PRO­VIN­CIAL COM­MIT­TEE

smaller than 40 met­ric tons will face the same cen­sure.

Tang­shan, the big­gest steel pro­ducer in He­bei, has ex­tended its re­stricted list cov­er­ing blast fur­naces with ca­pac­i­ties smaller than 1,000 cu­bic me­ters and con­vert­ers smaller than 60 met­ric tons.

“About 75 per­cent of the steel com­pa­nies are on the tar­get list ac­cord­ing to the na­tional stan­dards in Qian’an,” said Zhang Shuyun, mayor of Qian’an city, a pre­fec­ture-level city un­der Tang­shan. “How­ever, to reach the tar­get of the prov­ince, we have to raise our stan­dards. In ad­di­tion to ad­min­is­tra­tive mea­sures, the mar­ket- based mea­sures are cru­cial. Com­pa­nies that fail to reach the stan­dards will be forced out of the mar­ket through eco­nomic mea­sures.”

The prov­ince will raise the cost of elec­tric­ity and wa­ter in, mak­ing the com­pa­nies that use more en­ergy pay a higher price, ac­cord­ing to a doc­u­ment re­leased in Novem­ber aim­ing to con­trol the emis­sions of high-pol­lut­ing in­dus­tries in­clud­ing iron and steel.

Ac­cord­ing to the prov­ince’s plan, Tang­shan will cut 40 mil­lion met­ric tons of steel ca­pac­ity by 2017.

“The se­vere mea­sures of the lo­cal gov­ern­ment mean that elim­i­nat­ing over­ca­pac­ity are no longer just mere words here,” said Wang Siya, an in­dus­try an­a­lyst at JYD Online Corp, a Bei­jing-based bulk com­mod­ity con­sul­tancy.

“The steel mills have to be up­graded if the com­pa­nies want to con­tinue pro­duc­tion. Oth­er­wise, they will be elim­i­nated from the in­dus­try,” she said. “It is ben­e­fi­cial for the mar­ket in the long run but, at present, it won’t have a big im­pact on the down­stream mar­ket.”

Chen, the head of the lo­cal com­mis­sion, said the gov­ern­ment is en­cour­ag­ing com­pa­nies to ex­plore their busi­nesses in over­seas mar­kets.

“We will pro­vide help to th­ese com­pa­nies, es­pe­cially the ones which have to re­duce their ca­pac­ity but own high­qual­ity equip­ment.”

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