China, a major steel producing country in the world, is in the process of accelerating its plans to merge and reorganise its iron and steel industry. For the past few years, the Chinese government has been working on the supply-side reforms to keep the quality of steel in check and reduce the pressure on prices. Regional governments in the country are expediting their plans for capacity consolidation, according to China Metallurgical News.
Iron and steel capacity in transmission channel cities such as Jinan, Zibo, Liocheng, and Binzhou will be withdrawn by 70pc by 2022. In the same period, capacity in coastal areas like Qingdao Dongjiakou, Rizhao Lanshan, and Linyi Lingang will be raised by 50pc. In the subsequent three years, this capacity in coastal areas would be increased to more than 70pc in the province.
The province is promoting the formation of two bases with four clusters. These include Japanese-Linjiang advanced steel manufacturing industry base and Lai-Thailand high-quality steel production base. The clusters would include Rizhao advanced steel manufacturing industry cluster, Linyi Lingang high-end stainless steel and advanced special steel manufacturing industry cluster, Laiwu Fine steel and 400 series stainless steel industry cluster, and Tai’an special construction steel industry cluster.
By 2025, the province will have per day steel production through blast furnace of 1.2mn mt and 1mn mt through electric arc furnaces. The proportion of high-quality special steel is estimated to reach 50pc. The province will focus on building high-quality sheet industry chain, high-strength structural steel industry chain, high-end pipe industry chain, high-quality bar industry chain, and high-quality wire industry chain, promote the integration of western iron and steel enterprises. The annual sales revenue is estimated from these would be over CNY20bn.
By the year-end 2020, high-quality special steel production would account for 30pc of the total and the number of companies would be integrated into four, from the existing 11.
In the province, of the 18 are set to be integrated into three by the end of 2020. The integration is expected to curb production capacity by 17.927mn mt. Three steelmakers, including two large-scale conglomerates- Xugang, Sino-Singapore Steel, and one small scale producer Jinhong will have a production capacity of 8.827mn mt iron and 9.1mn mt of steel.
Companies in Handan would be merged and reduced to eight from the present 17 by the end of 2020. These would exclude independent foundry and all-scrap electric furnace companies. By 2025, the number of companies is expected to reduce further.
Companies like Hebei Xinjin Iron and Steel; Wen’an Iron and Steel; Wu’an Yongcheng Casting and few other steel companies in Wu’an would be merged to form a single company with a production capacity of more than 5mn mt. Southern Iron & Steel Group has already upgraded production capacity to over 6mn mt through the integration of equipment belonging to Wu’an Yuhua Iron and Steel; Hebei Wenfeng Iron and Steel; and Hebei Xinghua Iron and Steel.