(Recasts, updates throughout)
By David Stanway
BEIJING Feb 26 A vow by China to ban new steel
projects until 2017 will help to relieve oversupply in the
bloated sector but the policy will take time to have an effect,
China's top steel maker said on Wednesday.
New steel capacity addition in China is still exceeding the
tonnage due to be shut this year, Wang Jiguang, director of
Hebei Iron and Steel Group's sales unit, told a Metal Bulletin
conference in Beijing.
Overcapacity has dogged China's steel sector for years,
wasting resources and causing big losses at heavily indebted
mills, forcing them to rely on government subsidies.
Beijing has vowed to tackle the problem and said last week
that it will ban new projects in industries such as steel and
cement until 2017, while gradually eliminating existing
operations that are below-standard.
"The government has put new capacity construction under
strict controls and from now on the amount of additional
capacity will be very small," Wang said.
But there would be a lag before the policy started to bite.
Wang said 30 million tonnes of production capacity was
currently under construction, having been approved before the
ban was put in place. Top producing Hebei province will only
close about 15 million tonnes of capacity this year, he said,
without giving figures for the rest of China.
China has around 300 million tonnes of surplus steel
capacity, equal to nearly twice the European Union's total
output last year. Still, mills have continued to expand, adding
69.2 million tonnes of new capacity in 2013, according to a
report this month by consultancy CUsteel.
Wang said state-owned Hebei Group's utilisation rate for
crude steel production capacity stood at about 80 percent in
2013, but the rate for some steel products was as low as 60
China's top steel association said this week the industry
will not see a quick end to its troubles due to the level of
Efforts to consolidate the industry have also been hampered
by corruption and heavy losses.
Hebei Iron and Steel, mired in losses, replaced its chairman
in December. The firm's new chairman Yu Yong said profits and
resources in some of its subsidiaries had been embezzled,
according to a statement on the group's website.
Local media reported last month the company was undoing a
government-backed consolidation that saw it take stakes in 12
private firms because it wanted to focus on managing its own
assets to return to profit. Difficulities in consolidating the
fragmented industry would make the market more competitive and
more difficult to control.
Hebei province, which has an annual steel production
capacity of 250 million metric tonnes, accounts for about a
quarter of China's capacity, which stood at 1.04 billion tonnes
As part of a broader plan to tackle overcapacity and clean
up the environment, the government will shut 89.3 million tonnes
of outdated steel mills in the northern cities and provinces by
2017 at the latest.
(Writing by Fayen Wong; Editing by Richard Pullin)