China to continue to cut overcapacity in steel sector in 2018: top planning official

China will continue to cut excess capacity in the steel sector in 2018, while coal-to-electricity has become the focus area after steel and coal to close down outdated production, Ning Jizhe, Vice Chairman of the National Development and Reform Commission (NDRC) said at a news conference on Monday.

Ning noted cutting overcapacity constitutes primary task of government’s supply-side structural reform, which has been emphasized in last year’s government work report and aims to increase high-end supply, public products and services by stimulating business through tax cuts, entrepreneurship and innovation.

China’s supply-side reform and efforts to cut overcapacity in sectors like steel and coal have garnered worldwide attention in recent years. The measures, according to analysts, would not only increase production efficiency in the sectors but improve the country’s ecosystem and severe pollution problems.

Based on the government work report delivered by Premier Li last Sunday, 65 million tons of outdated production capacity in the steel sector has be reduced while 290 million tons of that in the coal industry has been closed down. “Meanwhile, the operation of the enterprises has been greatly improved with restructuring and upgrading efforts,”said Premier Li last Sunday.

When asked by Bloomberg why the target for cutting excess capacity in the steel is around 50 million tons, lower than last year’s 65 million tons, Ning emphasized that the volume is big enough, considering the estimated capacity for the whole steel sector in China is around 1 billion tons.  Ning added China will continue to cut excess capacity in 2018.

According to data from the National Bureau of Statistics, the total capacity in China’s steel sector is 1.1 billion tons. With annual consumption of 0.8 billion tons, capacity utilization in the sector now is over 70 percent.

According to Ning, after last years’ efforts to close down outdated production facilities, now the total capacity in the steel sector is down to 1 billion tons.

This year’s government work report released on Sunday has put forward a new target, which is to prevent and cut excess capacity in the coal-electricity sector by phasing out, restructuring and transforming backward production. “This year, (we will) weed out, suspend and hold back construction of coal-electricity capacity of 50 million kilowatts.

It is reported that China has been doubling its efforts to replace highly polluting coal power production with more efficient and clean production methods. According to Ning, in places like Shanghai and Zhejiang provinces, efficiency of coal power production has been equal to that in the developed countries.

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