Baosteel prepares to slash capacity through 2018 in supply-side reform
Baosteel Group, China’s second-biggest steelmaker, plans to cut its production capacity over the next two years as it pursues supply-side reform, it said on its website on Tuesday.
Baosteel’s announcement comes as the Chinese government works to reduce capacity gluts in the steel and coal sector.
The government has earmarked 27.6 billion yuan ($4.12 billion) to pay for closures in the sectors as the country has pledged to cut up to 150 million tons of steel capacity and 500 million tons of coal output in the next three to five years.
Overcapacity in China’s steel sector has also created trade tensions as India, Australia and the U.S. have imposed duties on Chinese steel exports amid allegations of dumping.
Baosteel pledged to cut 9.2 million tons of crude steel capacity between 2016 and 2018, the company said, equivalent to about one-quarter of its 2015 production.
The capacity shutdowns will include facilities in its flagship plant in Shanghai and branches outside of the city. The company will not resume production after the closures, it noted.
Baosteel’s cutbacks follow a statement by the State-owned Assets Supervision and Administration Commission on Friday that China’s government-run steel and coal companies will cut capacity by about 10 percent in the next two years and by 15 percent as of 2020.
The listed units of Baosteel and Wuhan Steel Group, the country’s sixth-largest mill, separately said in June they would restructure, without specifying details.
Baosteel Chairman Xu Lejiang told a government meeting on July 8 that large State-owned steel companies should use mergers and acquisitions to improve the concentration level of the industry and urged the government to step up efforts to close inefficient capacity, the company said on its website on Monday.
In April, a Chinese government official said the country has 1.13 billion tons of crude steel production capacity.