China restricts unauthorized steel mills
China has initiated an effort to close down unauthorized steel plants in order to counter the country's steel boom and soften the effects of power, coal and transport capacity shortages that threaten to destabilize the country's economy. The major problem affecting the Chinese steel industry is that since sub-standard steel is sold at relatively low prices for high profits, many small companies are making steel without government permission, which has pushed up the price of raw materials and interfered with the prices of finished products.
As a result, some cities and provinces have restructured their local
steelmaking industries and closed illegal producers and merged small facilities with larger and more competitive companies.
However, some local authorities are not heeding the instructions of their superiors in the central and provincial governments, and close down their facilities just temporarily, only to reopen them a few weeks later.
Consequently, in order to counter this problem, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) has published a list of 160 domestic steel companies which are active in producing sub-standard and illegal steel products. According to statistics released by AQSIQ, a total of 4'239 steel companies were investigated for sub-standard and illegal steel sales, of which 1'674 companies and 1'096 small mills were closed down by government officials.
According to the new regulation, local government official inspectors must report a list of illegal steel producers to the local electric authority, and then the local power station serving those companies must shut off the power supply within 2 days. These regulations were implemented not only to control illegal steel
production but, as
steelmaking is an energy intensive industry, also to help in reducing the national power shortage.
An official from National Development and Reform Commission (NDRC) stated that among the projects to be strictly banned include those which recently started
construction without central government approval, as well as those with blast furnaces smaller than 300 sq meters in capacity.