Beijing ditches target in new steel consolidation plan

Policymakers have again promised to make it easier for steel mills to merge and consolidate, but they appear to have ditched a long-standing target to bring 60 per cent of the sector under the control of its 10 biggest enterprises by 2015.

A new industry consolidation plan published on the website of the Ministry of Industry and Information Technology late on Monday said Beijing would continue to simplify approval procedures and make it easier for firms in bloated sectors like steel, cement and aluminium to finance acquisitions.

But the plan did not include the target, last mentioned in official documents in January last year, to put 60 per cent of the country's steel production capacity in the hands of its top 10 mills by 2015, up from about 40 per cent.

The target was part of a state strategy to help state-owned steel firms become more competitive by encouraging them to swallow smaller rivals, and led to a series of high-profile mergers in the sector. But the approach has been heavily criticised within the industry, with big firms increasingly reluctant to take on more unprofitable capacity.

Xu Lejiang, the chairman of Baoshan Iron and Steel, the mainland's second-biggest producer by capacity, said last year that the policy had created "huge monsters" lumbered with debt and unprofitable investments.

Before the global financial crisis, big state-owned steel firms were desperate to expand their market share through capacity increases, with many firms targeting annual production of more than 50 million tonnes.