China shuts down illegal steel production, stays tough on overcapacity

TIANJIN: China’s Tianjin Municipality and Hunan Province have dismantled production facilities for inferior-quality steel bars following a national inspection by the State Council, Chinese media reported.

Chinese Premier Li Keqiang recently called for steadfast efforts to push overcapacity cuts after the inspection found that certain steel mills were trying to resume production of inferior-quality steel bars.

China’s State Council required all facilities producing inferior-quality steel bars to be dismantled across the country by the end of June, but the inspection found two mills in Tianjin were still in business, while one company shut down in Hunan Province was seeking to resume production.

Government officials of Tianjin said that relevant production facilities in the two companies found to be producing the steel bars had already been dismantled.

Previously, the city had discovered four companies involved in the production of inferior-quality steel bars, and the equipment used in the illegal production had been removed by the end of June.

Yin Jihui, director of Tianjin Municipal Commission of Industry and Information Technology, said Tianjin carried out a week-long crackdown on inferior-quality steel bars after being informed by the State Council about the inspection findings on July 18.

“So far, 466 steel-making furnaces in 236 companies have been examined and no inferior-quality steel bar production has been found,” he said.

A total of 12 officials responsible for the illegal production have been punished. The companies in question are under police investigation and will be given due punishment.

Yin said the city will adopt multiple measures such as strengthening supervision and encouraging tips in order to prevent resumed production by facilities that had been shut down.

During the State Council inspection, Xinguang New Material Scientific Company in Xiangyin County of Yueyang City, Hunan Province, was found to have resumed three of its eight furnaces for inferior-quality steel bars, which were previously forced to be dismantled.

According to the city government, some county officials were punished for the case, and company personnel responsible for the resumed production have been detained.

Inferior-quality steel bars are low-quality products made of junk steel. Statistics showed that during the first half of this year, China closed down more than 600 companies with total inferior-quality steel bar production capacity of 120 million tonnes.

As excess capacity has weighed on China's overall economic performance, cutting overcapacity has been high on the reform agenda. In 2016, China completed both its annual targets for coal and steel capacity reduction ahead of schedule.

The government work report this year stated that China would continue to cut overcapacity in bloated sectors, with targets to slash steel production capacity by around 50 million tonnes and coal by at least 150 million tonnes this year.