(Adds analyst, context)
By David Stanway
BEIJING May 8 China has raised its target to
close outdated steel smelting capacity to 28.7 million tonnes in
2014, the industry ministry said on Thursday, as it tries to
rein in inefficient and polluting industries.
The figure is above the 27 million tonne closure target
included in a government report delivered by Premier Li Keqiang
in March, although is still only a fraction of overall capacity
after crude steel output hit 779 million tonnes last year.
Beijing has been trying to force industries such as steel,
cement and aluminium to update technology and close obsolete
facilities in a bid not only to improve air quality, but also to
tackle supply gluts that have eroded profits and put dozens of
plants on the brink of bankruptcy.
China's efforts to shut down steel plants are unlikely to
have a material impact on crude steel production, Alvin
D'Almaida, an analyst at Wood Mackenzie told an industry
conference in Singapore.
"Much of the shut down capacity will target small, obsolete
plants and many of which are already idle. Shutting large plants
is unlikely given the impact on employment and the high level of
unpaid debt it would create," he said.
Separately, the chief executive of miner Rio Tinto
said that moves by China to reduce capacity by closing ageing
steel mills would mean that the country would need more
high-grade iron ore produced by countries such as Australia.
"There have been announcements they will take off capacity
from those mills that are the least environmentally performing.
Associated with that, we've also seen there's been a move to
high grade the iron ore that the mills are bringing in," Sam
Walsh told reporters after Rio Tinto's Australian annual meeting
China's Ministry of Industry and Information Technology
(MIIT) said in an announcement on its website (www.miit.gov.cn)
that it would also shut 50.5 million tonnes of cement capacity
this year, higher than the 45 million tonne target set in March.
China also pledged to close 420,000 tonnes of outdated
aluminium capacity and 512,000 tonnes of copper production
capacity this year.
In addition, 12 million tonnes of coking coal production
facilities, 2.65 million tonnes of papermaking capacity and
102,400 tonnes of rare earth oxide production is due to be shut.
The closures are part of a national "eliminate outdated
capacity" programme and are separate from a government plan to
combat air pollution by shutting facilities such as steel mills
and cement plants in northern China and other smog-hit regions.
The province of Hebei has been ordered to close 60 million
tonnes of crude steel production between 2014-2017, and China is
also forcing hundreds of industrial enterprises to upgrade
technology to reduce air and water emissions.
An action plan on air pollution issued last year also banned
the construction of new steel, oil refining or thermal power
facilities in heavily polluted regions such as Beijing and the
Yangtze and Pearl river deltas.
China has excess industrial capacity in many sectors. The
utilisation rate in the steel sector was just 72 percent in
2013, while in the cement and aluminium sectors the rate stood
at 73.7 percent and 71.9 percent, respectively, according to
Authorities have threatened tough punishments for industrial
plants that continue to operate despite failing to meet
capacity, environment and technology standards, but it is also
planning to boost incentives for firms to toe the line.
China's finance ministry said on Tuesday it would provide
more subsidies for smaller firms to help cover the cost of
meeting the new standards.
(Additional reporting by Manolo Serapio in SINGAPORE and Sonali
Paul in Melbourne; Editing by Ed Davies)