March 7, 2014 / 11:01 AM / 4 years ago

UPDATE 1-China's Hebei province to shut more steel capacity if conditions allow

(Adds quote from Hebei official, details, background)

BEIJING, March 7 (Reuters) - China’s top steel producing province Hebei will shut more outdated steel capacity this year if market conditions allow, the governor said on Friday, adding that more than 10 percent of the province’s steel companies were in dire straits.

Hebei, with 148 steel companies, accounts for about a quarter of China’s total national steel output. Answering Beijing’s call to tackle overcapacity, it aims to cut its annual capacity by 15 million tonnes this year, and by 60 million tonnes by the end of 2017.

Provincial governor Zhang Qingwei has warned that any official responsible for another tonne of additional steel or cement capacity will be fired.

Near record low steel prices have put significant stress on Chinese steel firms, while greater determination to enforce environmental regulations has imposed additional costs on the enterprises. Beijing’s orders for banks to halt fresh loans have also fuelled fears there could be a wave of bankruptcies.

“Outdated capacity will be closed in accordance with national standards. There are also a number of steel firms that are facing operating problems and 16 have stopped producing,” he said in a press conference on the sidelines of China’s annual parliament session.

Beijing has traditionally struggled to impose its will on Hebei, home to thousands of barely-regulated private industrial enterprises that have provided considerable employment and tax revenues for local authorities. Previous attempts to consolidate the steel sector and curb overcapacity have not been successful.

The province’s steel production capacity is around 286 million tonnes per year, according to the latest estimates, with the national total well in excess of 1 billion tonnes.

China as a whole will close 27 million tonnes of crude steel capacity this year, the government said this week.

Chinese steel output, which hit 779 million tonnes last year, is now close to its peak, with the market weakening and the government determined to tackle a capacity glut responsible for mounting debts and heavy pollution, executives said. (Reporting by David Stanway; Editing by Tom Hogue)

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