Market Segment
Baosteel Cutting Capacity and Urges Other Chinese Mills to Follow Suit
Written by Sandy Williams
July 12, 2016
Baosteel Group says it will cut its crude steel capacity by 9.2 million tonnes between 2016 and 2018. At a government meeting on July 8, Baosteel’s chairman Xu Lejiang urged state-owned steel firms to use merger and acquisitions to address excess steel capacity. He also urged the government to step up efforts to eliminate inefficiencies in the industry.
The proposed capacity cut is equivalent to a quarter of Baosteel’s 2015 production of 36.11 million tonnes.
Baosteel will cut capacity at its Shanghai operation as well as branches outside of the city. The company pledged to not resume production after the closures.
The cutbacks are part of the company’s effort to comply with supply-side reform mandated by the Chinese government. Beijing plans to reduce steel production capacity by 150 million tonnes over the next three to five years.
Xu Shaoshi, chairman of the National Development and Reform Commission told provincial governments on Thursday that capacity reduction targets for steel and coal must be set by July 15 and detailed plans for reduction must be submitted by the end of the month. Provincial governments that fail to do so will be “seriously punished,” according to Xu. Regions were warned not to waiver due to economic conditions and unemployment and not to restart closed mills and coal mines.
The Ministry of Human Resources and Social Security said on Friday that the supply-side reforms will result in the loss of an estimated 800,000 coal and steel jobs in China this year.
Sandy Williams
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