SOEs accelerate capacity cutting

Regulator draws up plan spotlighting steel, coal

The State assets regulator has drawn up a 2- year plan under which centrally administered State- owned enterprises ( SOEs) will reduce excess capacity by about 10 percent, the Economic Information Daily reported on Wednesday, citing unidentified sources.

The State- owned Assets Supervision and Administration Commission ( SASAC), which oversees about 100 key central government SOEs, has given instructions to those SOEs with regard to the capacity- cutting campaign, according to the report.

Experts said the move is the SASAC’s response to a nationwide campaign, now in full swing, to address overcapacity in certain industries.

The tasks have also been broken down among central SOEs, a source told the Economic Information Daily, saying that initially work will be focused on cutting overcapacity in the steel and coal sectors.

Companies are drawing up plans and this year’s targets for central SOEs aim to trim annual iron and steel production by 7.19 million tons and coal production by 31.82 million tons.

“Many central SOEs are active in pursuing their respective capacity reduction targets, and the targets for this year should be easy to meet. But this will be a multi- year campaign,” said Wang Jianfu, an assistant to the general manager at Shanghai- based consulting firm Steelhome.

China’s largest coal producer by output Shenhua Group has already completed its capacity cuts for the year, according to a report by caijing. com. cn on August 11.

In 2016, the nation’s targets for steel and coal annual capacity cuts including those at SOEs total 45 million tons and 250 million tons, respectively.

As of the end of July, the country had slashed annual steel capacity by 21.26 million tons, about 47 percent of the planned cuts for 2016, Lian Weiliang, a vice chairman of the NDRC, said at a press briefing held in Beijing on last Friday.

Also, China had cut annual coal production capacity by 95 million tons, or 38 percent of this year’s target, as of the end of July, Lian noted.

“This year could be called an epochal year in China’s campaign against overcapacity. Previously, a lot of the overcapacity eliminated was obsolete. But now, many of the furnaces shut down are by no means outdated. They are being closed simply because steel mills are making little or no profit,” Wang told the Global Times on Wednesday.

Baosteel Group and Wuhan Iron & Steel Group, two leading steel makers under the SASAC, said in June through their listed arms that they would undergo a joint “strategic restructuring.”

“When the two combine, synergies can be achieved that will effectively reduce their capacity as their subsidiaries reschedule their production plans and avoid overlaps. That transition will be directed by the new headquarters after the restructuring,” Wang said.