SteelOrbis Shanghai
In the afternoon of April 27, representatives from the National Development and Reform Commission, the State Environmental Protection Administration of China, the China Iron and Steel Association (CISA) and Hebei's provincial government held a meeting in Beijing, which again emphasized the spirit of Premier Wen Jia Bao's recent speech regarding the elimination of out-of-date production capacity and announced agreements aiming at further progress on the issue.
An initial set of agreements was signed this afternoon. The agreements signed involved 344 steel enterprises in 10 provinces and municipalities (Beijing, Hebei, Shanxi, Liaoning, Jiangsu, Zhejiang, Jiangxi, Shandong, Henan, Xinjiang), encompassing out-of-date iron-making capacity totaling 39.86 million mt and steel-making capacity of 41.67 million mt, which are to be closed down or eliminated within five years. The Central Government plans to close down and eliminate 22.55 million mt of iron-making capacity and 24.23 million mt of steel-making capacity this year alone, which is seen as a heavy task.
Director of the National Development and Reform Commission, Ma Kai, added that in addition to the initial set of agreements, second and third sets would also be inked in the future. Meanwhile, the ten provinces and municipalities in question are also expected to make input in suggesting the tasks and targets of the second stage so as to solidify and expand the results of the out-of-date capacity elimination.
Ma Kai pointed out that in line with the State Council's arrangements the ten provinces and municipalities had already done a lot of work on the closing down and elimination of out-of-date steel production capacity. He remarked that the dated iron-making capacity in Hebei, Shanxi, Henan, Jiangsu and Shandong accounted for 70 percent of all China's, with the dated steel-making capacity covering 50 percent.
Luo Bing Sheng from the CISA stated that due to its surplus steel production capacity, the Chinese steel industry is characterized by structural conflicts. The production capacity of low-grade and medium-grade steel products is surplus in the industry, accounting for 20 percent or so of total capacity, while, on the other hand, high value-added products cannot meet domestic market demand.
The CISA official went on to state that in 2006 the total fixed assets investment for the steel industry totaled RMB 260.2 billion, up 0.8 percent year on year. Broken down into the various categories, iron-making projects accounted for 5.94 percent, steel-making projects covered 33.31 percent, with higher value-added processing of iron and steel products making up 60.75 percent. The investment structure showed an emphasis on product optimization, which is a good orientation. However, the industrial investment scale reached RMB 686.056 billion by the end of 2006, indicating a continuing blind expansion of production capacity.
Luo also mentioned that the high proportion of out-of-date capacity is a big reason for high energy consumption and serious pollution in the steel industry. In 2006, comprehensive energy consumption per ton of steel at the large and medium-scale mills was 645.12 kgbm, down 7.06 percent year on year; comparable energy consumption per ton of steel was 623.04 kgbm, down 6.19 percent; water consumption per ton of steel was 6.56 mt, down 14.9 percent; discharge of sulfur dioxide per ton of steel was down 4.1 percent; soot discharge down 2.99 percent; and powder discharge down 1.76 percent. This represents certain progress in energy saving and the reduction of pollution. However, generally speaking, the steel industry remains responsible for large energy consumption and pollution.
Luo Bing Sheng stated that the energy consumption of the steel industry is 14.71 percent of that of the whole nation; the steel industry waste discharge reaches 8.53 percent of the total industrial discharge; steel industry power discharge stands at 15.18 percent of the total. Compared with advanced international levels, since the large mills in China have continuously improved their production processes and equipment, the gap with international standards has narrowed. Baosteel and some other mills have reached advanced levels. All in all, energy consumption only shows a 10-15 percent gap from international levels.
The problem for medium and small mills with out-of-date equipment seems a difficult one. Their small blast furnaces (<300 m3) consume 200 kgbm/mt more compared with advanced levels; small converters have additional consumption of 90 kgbm/mt; the pollution discharge problem is even worse.
Luo Bing Sheng said that the emphasis for the whole industry in 2007 must be towards saving energy and reducing pollution so as to improve structural optimization, achieving improvement in variety, quality and profits.