Top Biz News

300 iron and steel works below drafting entry criteria

By Hao Yan (chinadaily.com.cn)
Updated: 2009-12-11 15:56

The Ministry of Industry and Information Technology (MIIT) announced a draft of new regulations for entry criteria into China's iron and steelworks sectors on Dec 9 – the first time the government has imposed minimum entry requirements for the industry.

The new regulations include six minimum standards. Among them are requirements for environmental protection, energy and resource consumption, technique and equipment, safety and sanitation, and social liabilities. In addition, they must also have an output of at least one million tons.

The new standards – especially the minimum output rule – exclude about 60 percent, or 300, of existing steel works.

"Only 80 to 90 works are qualified. Works failed to meet the criteria will not be admitted for new projects or reconstruct current ones, no more credit loans or iron ore imports," finance magazine Caijing's website quoted an unnamed source from the MIIT saying. "They can still maintain their production."

The goal of the changes is to help consolidate the industry, eliminating waste, and making the factories easier to regulate.

What the government is doing is "is like cutting off the food supply," said Xu Xiangchun, information officer of mysteel.com, a well known steel e-commerce platform in Shanghai. He anticipated two thirds of the works will be forced to merge with other companies.

Xu also said that one of the challenges for the new regulation will be the fact that a steelworks factory can be very profitable for local governments. Some factories make 3 billion yuan ($439 million) revenue annually, and therefore help contribute a large amount of tax revenue to local governments, even with lower output levels.

The MIIT also said that China should abandon obsolete production methods, which will produce about 125 million tons of iron and 28 million tons steel by 2011. This year's objectives are 21.13 million tons of iron and 16.91 million tons of steel. Hebei province, which produces the most iron and steel, will also have to discard the most obsolete production equipment.

The MIIT has also submitted guidance and other advice on ways to best accelerate the consolidation and restructuring of the iron and steelworks sector to related government bureaus and administrations.

The ministry is working to formulate operational regulations to lead the development of the sector as well, according to the website cnstock.com.