Steel reform gets goal-driven

ing outdated capacity back on stream.

In December, the Central Committee of the Communist Party of China and the State Council penalized two steel companies in Jiangsu and Hebei provinces for producing substandard steel and building factories that had yet to be approved. Two deputy governors of the two provinces have been held accountable and 138 people involved in the cases were punished.

Chen Kexin, chief analyst of the Lange Steel Information Research Center, said that the capacity reduction goal in 2017 is going to be higher than 2016. At the same time, there will be more challenges.

“Overcapacity is estimated to be 100 to 200 million tons. This excess is seriously polluting the environment and churning out low quality steel. In 2017, there will be stricter administrative and environmental standards,” he said.

According to Chang jiang Securities Co Ltd, the goal of capacity shedding may increase by more than 10 percent in 2016.

Meanwhile, the merger of Baosteel and Wuhan Iron & Steel group has set industry along the path of wider reorganization.

The landmark merger in December has created China Baowu Steel Group — the world’s second largest steelmaker by annual output. The new steel entity is estimated to have total assets worth 730 billion yuan.

Xu Xiangchun, chief analyst of mystee.com, said that the biggest effect of the merger would be on competition.

“Scattered and disorderly competition will be changed. It always used to be the case that in the steel industry the north was more powerful than the south. The merger is changing the situation.