China’s crackdown on ‘illegal’ steel production

China intends to conduct random inspections among provincial regions that are ‘prone to illegal steel production activities’ this year, government officials have announced.

The move will be part of the country’s efforts to maintain high pressure on overcapacity in the sector, said Lyu Guixin, an inspector with the raw material department of the Ministry of Industry and Information Technology. He says the government will use methods such as satellite remote sensing will be used to check unwanted steel production.

As a result of slashed capacity in the past years, the steel market has recovered and rendered high profits for producers, Lyu notes. This prompted several companies to attempt to expand their capacity.

China’s steel output was almost 150 million tonnes in the first two months of this year. This means volume is up by more than 9% compared to the opening months of 2018, when output totalled 127 million tonnes.

China’s steel industry reported profits of around 470 billion yuan (or US$ 70 billion) in 2018. This represents a 39% year-on-year increase. Meanwhile crude steel output grew 6.6% to ‘a record high’ of 928 million tonnes.

Lyu argues it is paramount that the government is able to ‘strictly enforce’ the ban on new capacity to ‘consolidate the achievements of the supply-side structural reform in the steel sector’.