3 China mills eye building new upstream capacity

3 Chinese steel producers from 3 provinces and autonomous region across China have formally announced plans so far this year to install new iron- or steelmaking capacity while removing outdated facilities, according to local government statements collated by Mysteel Global as of 14 March.

In total, about 1.52 million tonnes/year of ironmaking capacity in blast furnaces (BFs) and 1.66 million t/year of steelmaking capacity in electric arc furnaces (EAFs) are to be newly added if the plans are approved, while approximately 1.82 million t/year of outdated ironmaking capacity and 2.33 million t/year of old steelmaking capacity will be removed, Mysteel Global calculates.

To add new facilities, Chinese steelmakers need to meet the country's long-standing 'capacity swap' regulations which demand that whenever new iron- or steelmaking capacity is introduced, old facilities of at least the same productive capacity in operation at the time need to be stopped and eventually scrapped, either capacity that the mills already own or capacity they have "purchased" from other steelmakers, as reported.

The old-for-new swap ratio for BFs must be no less than 1.5:1 in areas that are susceptible to atmospheric pollution such as the Beijing-Tianjin-Hebei region, while the ratio for EAFs is set at 1:1, Mysteel Global notes.

For example, in late January the Department of Industry and Information Technology in Northeast China's Liaoning province announced that Jinzhou Jinxing Special Steel Company is planning to bring about 360,000 t/y of new steelmaking capacity online at a ratio of 1:1, which means the specialty steel maker will be eliminating the same amount of existing capacity.

Notably, Jinxing Special Steel plans to idle 380,000 t/year of old steelmaking capacity, meaning that it will have additional 20,000 t/year of 'stopped' capacity that it will be able to use for expanding capacity in the future or for selling to other steelmakers needing to accumulate 'scrapped' capacity to meet swap ratio requirements for their projects.

The provincial governments allow a period for public comment on the steelmakers' swap projects, and if no objections are raised, the authorities will issue official releases for the mills to commence construction, Mysteel Global noted.

Of the three companies, Jinxing Special Steel is now free to start actioning its capacity-swap plans, having earlier received local government approval on 29 February, while the others' plans are still subject to public scrutiny and comment until late-March.

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and BigMint.