Three whitelists rules out 15% steel capacity in China

 Nov 25, China’s Ministry of Industry & Information Technology (MIIT) unveiled the third whitelist of steel companies that are regarded qualifying for the industry regulations, on which 147 steel mills are included. So far from 2012, MIIT has released three panels of whitelists, totally validating 305 steel companies. That means about 85% steel capacities in China have been granted with official qualification, and the left 15% capacities are more likely to be ruled out of the industry in future.

As learned, the third whitelist was published preliminarily on Aug 25 this year, which incorporates 149 steel companies, but the number contracts to 147 in the final release three months later – Nannping Shuangyou Metal, Fujian Sanjin Steel and Shougang Changzhi Steel are dumped from the list and at the same time Fujian Luoyuan Minguang Steel is newly listed. What’s to be noted was that Hebei Xinjin Steel and Guangdong Yangchun New Steel were also suffered dumping in the second whitelist competition due to insufficient environmental protection qualification, but this time, they are incorporated on the third whitelist again. The phenomenon also passes the signal that the country will implement sustained inspections on mills’ operation, and adjust the lists dynamically. They give chances for companies to make updates.

Officials from MIIT disclosed that the ministry is originally thinking some no more than 200 steel companies to be listed on the white panel, covering about 80-90% steel capacity, but “the number of steel companies on the three whitelists now added up to 305, surpassing the original plan”, said an analyst who believes there would be more companies removed from the lists as long as they are found not qualifying any more.

The census mapping work is indeed not easy. The think tank of steel industry, China Metallurgical Industry Planning & Research Institute (MIP), claimed that China’s real steel consumption in 2013 is 693 mln tonnes, and the supply glut is about 100 mln tonnes. But the results given by other institutes turn out another picture. By the end of 2012, National Development & Reform Commission, MIIT and China Iron & Steel Association all released their respective data for China’s real steel capacity, hitting somewhere between 950 and 980 mln tonnes, which suggests there were about 200 mln tonnes of excessive capacity. An senior analyst told the reporter of National Business that the steel capacity in China have reached 1.3 bln tonnes, and only 0.5 bln tonnes of them have been approved by national supervising departments. The other 0.8 bln tonnes have already been in publicly secret operation without any certification, and some of them are self-built capacities of very large steel conglomerates. The inspection of the sector is somewhat a failure.

What’s on the bright side is that the nation’s crude steel output volume growth has been slowing down since 2012, and the growth rate decelerated 6.2 percentage point to 2.1% in the first ten months this year, and that of steel products over the same period beat down 6.9 percentage point to 4.7%. Comparing with the 261% rampant growth (about 506 bln yuan increase) of steel investment from 2003 to 2013, the 0.5 bln yuan of investment increment to the sector in 2013 from 2012 should be tiny. And in terms of the blurred demand outlook next year and the country’s capital control to the sector, the investment in steel industry in 2015 would continue to shrink.

Edited by www.mysteel.net