The Ministry of Industry and Information Technology (MIIT) has published a list of 45 Chinese steel companies that meet national iron and steel industrial standards as its latest move to tackle excess production capacity that has plagued the sector.

The list, published in April, lists steelmakers that are up to standard regarding product quality, environmental protection, energy consumption, workmanship and equipment, and size, as well as safety and other social responsibility. The 45 qualified steel makers include 30 state-owned enterprises such as Baosteel and Angang Steel, and 15 private companies, with combined crude steel output last year of 300Mt, or 41.4% of the country’s total steel output. The 45 approved companies were chosen from 104 firms located in 19 provinces, municipalities and autonomous regions.

Miao Zhimin, deputy director of the Raw Materials Department of the MIIT, said the ministry would work with other government departments to support the approved companies and facilitate the merger and restructuring of the steel industry. Companies that fail to meet the national standards will have their growth squeezed by imposing higher electricity prices and stricter administrativemeasures, Miao said.

While China has remained the world’s largest steel producer for many years, overcapacity has been a longstanding problem for the sector, as local governments prefer to increase the size of local steel companies to drive local economies, leading to a combined production capacity that exceeds the combined output by the rest of the world. China’s steel capacity stood at around 1bnt 2012, but major steel makers reported slim profits reaching a combined RMB1.5bn ($239M) in profits last year, according to MIIT data. Currently, the country relies mainly on administrative approval to regulate the steel industry but has had little effect in eliminating overcapacity.

“It has been proved that the existing regulation measures fail to stop the indiscriminate development of the steel sector,” Miao said, adding “we should explore a new way to regulate the sector and make it follow market rules and develop orderly.” He said the MIIT would continue to review enterprises applying for examination of the national standards this year.

About 80% of the existing steel production capacity will be regulated according to the new national standards by 2015, he added.

Source: China Metals e-mail