SOEs hit goal

Short-term tar­get to re­duce steel pro­duc­tion by 27 mil­lion met­ric tons within three years

China Daily (USA) - - FRONT PAGE - By YANG ZI­MAN yangz­i­man@ chi­nadaily.com.cn

State-owned en­ter­prises have reached the goal of trim­ming over­ca­pac­ity.

State-owned en­ter­prises di­rectly un­der the su­per­vi­sion of the State-owned As­sets Su­per­vi­sion and Ad­min­is­tra­tion Com­mis­sion have reached the goal of trim­ming their over­ca­pac­ity this year, well be­fore the end of 2016, ac­cord­ing to a top of­fi­cial of the com­mis­sion.

There are 103 SOEs di­rectly un­der the su­per­vi­sion of the SASAC. They in­clude three all-steel com­pa­nies: Baos­teel Group, Wuhan Iron & Steel Group and An­steel Group, as well as two steel re­lated com­pa­nies — China Min­er­als Corp and Xinx­ing Cathay In­ter­na­tional Group.

The short-term goal of ca­pac­ity re­duc­tion is to cut crude steel ca­pac­ity by 15 per­cent, or a re­duc­tion of 27 mil­lion met­ric tons, within three years start­ing from 2016. This year’s goal is a re­duc­tion of 7.19 mil­lion tons.

Li Bing, chief of the cor­po­rate re­form of­fice of the SASAC, said that the over­all re­duc­tion of ca­pac­ity would be com­pleted by the com­pa­nies’ own re­duc­tions of 16.4 mil­lion tons, 9.39 mil­lion tons by merg­ers and re­or­ga­ni­za­tion and 1 mil­lion tons by ex­port cross-border co­op­er­a­tion.

“The fu­ture ca­pac­ity re­duc­tion goal is ex­pected to in­crease,” Li said.

The to­tal crude steel ca­pac­ity of the five steel and steel-re­lated com­pa­nies in 2015 stood at 138 mil­lion tons, ac­count­ing for 12.2 per­cent of the to­tal steel ca­pac­ity in China.

Baos­teel an­nounced in July that it would re­duce its over­ca­pac­ity by 9.2 mil­lion tons from 2016 to 2018. In Au­gust, it an­nounced that the com­pany had reached the yearly goal of re­duc­ing 3.95 mil­lion tons.

Wuhan Iron& Steel said in May that it would re­duce ca­pac­ity by 4.42 mil­lion tons. Yet it has not pub­lished its progress in this re­gard. Other steel-re­lated SOEs have not dis­closed their goals this year or their progress.

Li said that ca­pac­ity re­duc­tion had be­come a key cri­te­rion for steel SOE lead­ers’ per­for­mance re­views.

“The boards of SOEs must strictly re­view po­ten­tial in­vest­ment projects,” he said.

“If any of them add newor ex­pand ex­ist­ing steel ca­pac­ity, the board of the com­pany would be sub­jected to re­or­ga­ni­za­tion,” he added.

On the other hand, lead­ers of whose com­pa­nies which had made sig­nif­i­cant progress in ca­pac­ity re­duc­tion would be awarded bonus points in per­for­mance re­views and in­creases in salary, he said.

Xu Xiao­qing, a steel an­a­lyst at 315.com.cn, an in­for­ma­tion web­site on bulk com­modi­ties, said that Wuhan Iron & Steel was ex­pected to out­per­form its ca­pac­ity re­duc­tion goal this year and An­steel was ex­pected to reach its goal.

“The merger of Baos­teel and Wuhan Iron & Steel in Septem­ber is a sig­nal: merg­ers and re­or­ga­ni­za­tion will be the main di­rec­tion for the in­dus­try in the fu­ture. The days of blind ex­pan­sion will be over,” said Xu.

The merger of Baos­teel and Wuhan Iron & Steel in Septem­ber is a sig­nal ...”

Xu Xiao­qing, a steel an­a­lyst at 315.com.cn, an in­for­ma­tion web­site on bulk com­modi­ties

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