China Looks to Tighten Chinese Steel Industry

The executive meeting of the China State Council announced a change in industry policy to better control the iron and steel industry in China. According to published reports the council will be implementing a new policy to regulate this sector.

The goal of the changed policy is to guarantee the long-term health of the Chinese iron and steel industry. The biggest move will be to have the government concentrate its efforts on the largest Chinese steel makers, and boost the industrial upgrading of the steel sector through new technologies and management and production efficiency.

The change in policy is expected to be complete within the next several weeks.

According to China Daily, during the recent executive meeting there were warnings made that China's on-going industrialization and urbanization has increased the country's demand for iron and steel products, but excessive and unregulated investment in the essential industry risks creating an imbalance in overall economic growth, the waste of energy resources and severe environmental pollution .

China produced 270 million tons of steel last year, making it the world's largest steel producer.

The National Development and Reform Commission, China's top policy planner, is working on a steel industry development plan by 2020, according to Wu Pengfei, an industry analyst in steel with Beijing-based Guotai & Jun'an Securities.

Also , the central government will cut the steel export rebate rate from 13 percent to 11 percent from May 1 after the elimination of the steel billet export rebate on April 1, in a move to reduce exports of the high energy-consuming products, say insiders.

To date, 15 steel companies in China are responsible for about 45 percent of the country's steel products last year. It is expected that the change in policy will result in a number of smaller steel mills closing.

The new policy sets new requirements for steel makers in China in a number of different areas including the scale of production and efficiency, technical expertise, energy consumption and environmental protection performance. According to the policy, a raft of market measures such as tax rebates will also be introduced to promote the high value-added steel production .

The report said many smaller steel factories would likely be shut down or acquired by larger companies, though some might get upgraded technology and equipment.