Source: Bloomberg
China suddenly suspended the approval of new steel plants. In the face of the severe decline in the demand for steel, the government responded.
The Chinese government has been implementing such an institutional arrangement for many years. Enterprises can build steel factories, but the prerequisite is that a certain number of existing old capacity must be demolished.According to the notice of the Ministry of Industry and Information Technology, the implementation of steel production capacity replacement will be suspended from August 23.
In recent months, with the excessive supply of supply, the price of steel has plummeted, and the Chinese government's call for action is getting higher and higher.Since 2020, demand has decreased by more than 10%, and many analysts said that the industry needs to shrink to adapt to the decrease in the economy of the economy on steel -steel -intensive buildings.
China ’s steel exports this year have soared to the highest level since 2016, indicating that it is difficult for steel mills to find buyers in the domestic market for about 1 billion tons of output each year.
The Ministry of Industry and Information Technology stated in the notice that the supply and demand relationship between the steel industry is facing new challenges; in the field of steel production capacity replacement, there are still problems such as inadequate policy implementation, incomplete supervision and implementation mechanism, and incompatibility with the development of the industry.
In recent months, the dilemma of China's steel industry has deepened. China Baowu Iron and Steel Group, the world's largest producer in the world, warned that the situation facing the industry was worse than the 2008 and 2015 crisis.
China launched a production capacity replacement policy for the heavy industry in the heavy industry of steel about ten years ago, and began to solve the problem of unrestrained expansion.According to the latest regulations issued three years ago, every 1 ton of steel production capacity is increased in environmental sensitive areas, 1.5 tons of existing production capacity must be closed, and other regions will be closed by 1.25 tons.
