China’s steel capacity grows despite drive to cut output, Greenpeace says

PUBLISHED : Tuesday, 14 February, 2017, 8:02am
UPDATED : Tuesday, 14 February, 2017, 8:02am

China’s steel industry saw an increase in operating capacity last year despite a government push to tackle excess production, Greenpeace and an industry ­consultancy say in a new report.

The regional arm of the NGO and Chinese consultancy Custeel found that most steel mills shut down during the drive last year were already idle.

The cuts made during the campaign were offset by resumed production and newly added output, leading to a net increase of 36.5 million tonnes in operating capacity, according to the report published on Monday.

The study came as the top ­economic planner announced crude steel production increased 1.2 per cent to hit 808.37 million tonnes last year, against a 2.3 per cent drop in 2015.

China, which ­accounts for about half of global steel output, has pledged to cut annual production by 100 to 150 million tones by 2020, to help shift the economy away from a reliance on polluting heavy industries.

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Steel exports have also become a source of friction with some of China’s biggest trade partners, who accuse it of dumping cheap products in their markets, threatening local jobs.

The central government said it cut 85 million tonnes of capacity last year, nearly double its original target, but the report said 74 per cent of the retired plants were no longer active.

Some 23 million tonnes of operating capacity was cut, but the reduction was dwarfed by the 54 million tones of resumed production and 12 million tonnes of new capacity that came online, the report said.

“Impressive as they seem, China’s current steel capacity reduction targets won’t suffice to limit oversupply, as local governments manoeuvre to shield zombie steel mills and minimise the impact of the policies,” Lauri ­Myllyvirta, an expert on energy and pollution at Greenpeace, said.

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“Global markets are awash with steel and the people of northern China continue to choke on the industry’s major by-product, smog. Increasing steel capacity makes neither economic nor environmental sense,” he said.

The iron and steel industry is the biggest contributor of harmful emissions in the dense urban belt that encompasses Beijing, Tianjin and Hebei. Operating steel capacity grew by 5 per cent in the region, and three-quarters of all restarted production occurred in Beijing’s neighbouring provinces, Shanxi, Hebei and Tianjin, the report said.