Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

China mulls to stop accepting capacity transfer applications from outdated and low-grade steel and ferroalloy plants from June 1 onwards. China’s Ministry of Industry and Information Technology issued a new version of capacity replacement measures on May 6.


The newer measures call for strict criteria for steel capacity swaps from key areas to new steel projects. The new policy has also changed the replacement ratio. A wider region has been brought under environmentally sensitive areas which include the Fenwei Plain and other ‘2+26’ atmospheric channel cities in addition to the original three regions of Beijing-Tianjin-Hebei, Yangtze River Delta, and Pearl River Delta.  


In the key areas under air pollution prevention and control, the replacement ratio should not be less than 1.5:1, while the replacement ratio in other areas should not be less than 1.25:1. It also requires that the total steel production capacity of the area should not increase. Provinces that have not reached the total steel production capacity control targets shall not accept capacity transfer projects from other regions. In the Yangtze River Economic Belt region, new or steel capacity expansion outside the compliance zone is prohibited.


The new version also calls for equal replacement scenarios, increasing the original one for six methods and a third-party evaluation of the replacement plans.


Besides, the new measures focus on non-blast furnace ironmaking emphasizing a switch to electric furnace steelmaking and hydrogen smelting to achieve low-carbon development goals.

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