China's National Development and Reform Commission (NDRC) has stated that announcements and approvals of new steel capacity replacement projects by local governments are suspended starting from January 24. The decision has been made to deepen the supply-side structural reform of the steel industry as since 2016, when the capacity replacement program started in China, some projects had inadequate capacity transfer procedures.
Moreover, the NDRC has ordered local governments to make an examination of existing steel production capacity replacement projects and to stop operation of those plants which have broken any rules of the steel capacity replacement process - by starting production at new equipment before the stoppage of existing capacities, for example. Projects which have been approved but whose construction has not started yet will be checked and may start construction works only after confirmation of all necessary requirements. Inspections of capacity replacement projects will be in place until April 30.
China’s steel production increased by 8.3 percent year on year to 996.3 million mt in 2019, while new capacity expansions have been prohibited in the country. Most mills have used licenses of other closed companies to expand their own capacities or have changed equipment to be more efficient under the capacity replacement projects.