January 23, 2020 / 11:19 AM / a month ago

China to halt capacity swaps in steel industry from January 24

FILE PHOTO: Workers are seen at a wire rod rolling mill of a steel firm during a media tour in Qingdao, Shandong province, China September 27, 2019. REUTERS/Min Zhang

BEIJING (Reuters) - China will stop approving new capacity and capacity swaps for steel projects from Jan. 24, the country’s state planner said on Thursday, as the government wants to review all the projects first.

Crude steel production in China, the world’s top steel producer, climbed to a record high just shy of 1 billion tonnes last year despite Beijing’s efforts to ease oversupply as some mills used swaps as an excuse to add new capacity.

The country has eliminated more than 150 million tonnes of outdated steel capacity and another 140 million tonnes of low grade steel production over the past four years.

It has also banned adding any new capacity unless a bigger volume of old capacity is shut, a process known as “capacity swaps”.

However, the government has found instances where some steel mills have expanded production capacity under the guise of capacity swaps.

China will also carry out inspections to review all capacity swap projects approved since 2016 and shut any illegal capacity, the National Development and Reform Commission (NDRC) said.

“Local authorities must strictly implement the rules and tighten management...and must resolutely correct the mistakes and punish the responsible people,” said the statement.

The NDRC also asks steel mills to speed up installation of environmental equipment to ensure the emission to meet the strict standards in mills-clustered northern China.

Reporting by Muyu Xu and Tom Daly; editing by Jason Neely and Katya Golubkova

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