Hebei Raises Steel Capacity Reduction Goals for 2017

The Chinese government has come down hard on steel producers who fail to comply with mandates to reduce over capacity and meet environmental goals. Hebei province, home to the capital Beijing, produces about one fourth of China’s steel and is one of the most polluted provinces in the country.

Last year Hebei reached its target of reducing 14.22 million tons ahead of schedule, accomplishing it by the end of October.

Zhang was quoted by Reuter’s as saying four “zombie firms” would be shut down in 2017 and plans to reduce ironmaking and steel production capacity in the cities of Langfang, Baoding, and Zhangjiakou would be accelerated.

In addition to steel reductions, capacity of coal, cement and flat glass in Hebei will be reduced this year by 7.42 million tonnes, 1.1 million tonnes and 5 million weight cases, respectively.

Xu Shaoshi, chairman of the National Development and Reform Commission, said the 45 million tons of steel and 250 million tonnes of coal capacity cut in 2016 came at the cost of 800,000 coal and steelworker jobs. The government resettled approximately 700,000 of those workers into new jobs by the end of the year.

The capacity cuts are intended to remove unprofitable companies with high debt that have become a drag on the Chinese economy. It is a difficult task in a culture that values employment and stability. Coal and steel production are major contributors to the overwhelming pollution in Chinese cities.

China on December 30 announced in its 13th five-year plan that it will focus on industry restructuring and reform as well as improving air quality. Last year the country limited coal production to 276 days. It has recently raised that to 330 days but hopes by 2020 to remove 800 million tonnes of inefficient coal production while adding 500 million tonnes of high quality “clean coal” capacity. The National Development and Reform Commission said it will not approve any new coal mines until 2020 and will then only approve new projects of at least 1.2 million tonnes a year.

The Chinese National Energy Administration announced it will invest $360 billion between now and 2020 in clean energy projects like wind, hydro, solar and nuclear power. The $72 billion per year investment is expected to create 15 million new jobs. To put that in perspective, according to ZME Science, global energy investment in 2015 was $285.9 billion and the U.S. energy investments totaled $44 billion.

The latest five year plan sets energy consumption annual growth at 2.5 percent, down from 3.6 percent in the previous five year plan. Ideally, the NEA would like raise gas consumption to 6.8 percent in 2017 while reducing the share of coal in the energy consumption mix to 50 percent. By 2020, the goal is to have consumption of non-fossil fuels at 15 percent with the natural gas share at 10 percent and coal consumption below 58 percent.