China to formulate 2021-2022 winter production restriction plan

China’s Ministry of Industry and Information Technology and the Ministry of Ecology and Environment will work with relevant parties in the near future to jointly formulate a plan for restricting steel production in autumn and winter 2021-2022. This will be the main measure to ensure crude steel output reduction in the second half of the year, Kallanish notes.

Wu Xianfeng, deputy director of the Department of Atmospheric Environment of the Ministry of Ecology and Environment, has publicly stated that the main task of China’s steel industry has shifted from reducing production capacity to reducing output. The reduction of output will be carried out through the principle of “Two limits, Two unrestricted, and Three possible”.

“Two limits” means to focus on restricting steel production in key areas and to focus on restricting the production of companies with low environmental performance ratings and high capacity utilisation rates. “Two unrestricted” means two types of enterprises are not restricted. One is firms that meet the ultra-low emissions standard and have an environmental performance rating of A. The other is electric arc furnace steelmakers. “Three possible” means that the output reduction measures are operable, verifiable, and statistical.

For steel companies that have completed ultra-low emissions transformations, the government will increase policy support and implement differentiated environmental management policies. These include enjoying environmental tax concessions, preferential environmental protection equipment purchase tax concessions, and differentiated water and electricity price concessions.

According to data from the National Bureau of Statistics, China’s crude steel output in H1 was 563 million tonnes, an increase of 11.8% year-on-year. Crude steel production in 2020 was 1.065 billion tonnes. In order to ensure that output of crude steel will not increase this year, H2 production must be controlled within 502mt. This would mean output needs to be reduced by at least 61mt compared with H1.

By Kallanish Team