The Chinese government has announced that small steelmakers, with steel blast furnaces smaller than 400 cubic meters, must shut down by the end of this year, based on a Tuesday announcement from The State Council.
This is part of a push to reduce overcapacity across a range of industries including power, coal, steel, cement, and metals. Note that China enacted a three-year moratorium on new applications for steel capacity expansion last year.
“These small steel mills are mostly located in Shandong and Shanxi provinces,” said Du Wei, an analyst with industry consultancy firm Umetals.com.
“It is hard to calculate how many of these steelmakers there are, but the new move will help rein in overcapacity in the steel industry,” Du said.
China’s crude steel production capacity was forecast at 700 million tons at the end of 2009, while China’s steel output stood at 567.84 million tons last year.
It’s good news for the large players, but given continued expansion at larger steel producers (they had expansion plans which were applied for ahead of the recent moratorium, one has to imagine that these small producer shutdowns will end being just a drop in the bucket.
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