In 2018, the steel industry will fully implement volume reduction and replacement

One of the main problems facing the steel industry today is overcapacity. It is understood that the steel industry will fully implement volume reduction and replacement in 2018, and the new capacity must be less than the obsolete capacity. Experts predict that this will not have a significant impact on the price of steel.

It is reported that capacity replacement means that certain backward or excess capacity must be eliminated when a new project with a certain capacity is built, which is an effective way to control the total capacity. The Ministry of Industry and Information Technology released the revised Measures for the Implementation of Capacity Replacement in the Iron and Steel Industry yesterday (August 8), which clearly stated that the iron and steel industry will fully implement volume reduction and replacement in the future, that is, the new capacity will be less than the obsolete capacity.

The revised Measures for the Implementation of Capacity Replacement in the Iron and Steel Industry clearly states that in the future, no matter whether the construction project is new construction, reconstruction, expansion or "off-site overhaul", as long as it involves the construction of ironmaking and steelmaking equipment, capacity replacement must be carried out.

The capacity that can be used for replacement must be legally and legally built. However, six types of capacity listed in the de-capacity task, such as capacity, exit capacity, "strip steel" capacity, backward capacity, capacity of dismantled main equipment, and smelting equipment capacity of non-steel industry, are not allowed to be used for replacement. Xu Wenli, director of the Iron and Steel Division of the Department of Raw Materials Industry of the Ministry of Industry and Information Technology, said that the method also standardized the calculation of the replacement ratio to avoid the phenomenon of playing "number games".

Xu Wenli said: "In the past, one equipment corresponds to two kinds of production capacity, one is the production capacity of ordinary steel and the other is the production capacity of special steel. When the local implementation, there may be the problem of mixed conversion between ordinary steel and special steel, and there may be some loopholes in the operation. Therefore, in the new method, the problem of mutual conversion between ordinary steel and special steel in the unified furnace has been canceled, and the unified conversion number has been adjusted, so that we can measure to the end with a ruler."

From a regional perspective, the method further tightened the replacement ratio requirements. Qin Song, deputy director of the Department of Science and Technology and Environmental Protection of the China Iron and Steel Industry Association, said: "The replacement ratio of environmentally sensitive areas such as Beijing-Tianjin-Hebei, Yangtze River Delta and Pearl River Delta should continue to implement the requirement of no less than 1.25:1, and other areas should be adjusted from equal replacement to reduced replacement. At the same time, local governments are encouraged to implement stricter replacement ratio requirements in combination with the actual situation to promote the structural adjustment of the iron and steel industry."

That is to say, the steel industry will fully implement volume reduction and replacement in the future. Of course, in order to encourage and support the short-process steelmaking of electric furnace with obvious advantages in energy conservation and emission reduction, the method proposes that the electric furnace can be replaced in equal amount after exiting the converter construction.

It is worth noting that as long as new steel projects are built in the future, all of them will go through the channel of capacity replacement, which can also be transferred and traded across provinces. For example, if a province wants to launch some steel projects, but the capacity available for replacement in the province is not enough, it can purchase replacement capacity from other provinces. However, Xu Wenli said that provinces and cities with high environmental pressure cannot undertake production capacity at will. "The State Council has put forward the goal of total steel capacity control for Tianjin, Hebei and Shandong provinces and cities. Provinces (regions and cities) that have not completed the goal of total steel capacity control shall not accept the transferred capacity from other regions. For regions that have completed the goal of regional total capacity control, when accepting the transferred capacity from other regions, they must firmly hold the bottom line of not breaking the goal of total regional capacity control."

The reduction and replacement will further reduce the total capacity of steel, which will push up the price of steel. Qin Song analyzed from the perspective of supply and demand that the reduction and replacement would not have a great impact on the steel price.

Qin Song pointed out: "Our production capacity is still surplus. In this context, the steel price has recently corrected, and of course, the fluctuation is normal. The small environment is that the ex-factory price of steel is relatively stable, especially since we held a symposium for 11 downstream users a while ago. In addition to the steel consumption of real estate, all users are relatively stable in the next year."

Source: China Enterprise Network