From Forward Magazine.....
China's State Council, or cabinet, this week called on local authorities to "resolutely" reduce overcapacity in steel and cement manufacturing. This is not a new idea in China, which for years has been decreeing steel capacity reductions, even as tens of millions of tons of new capacity have been added. Local governments, which often compete with one another in steel production, have been reluctant to close all but the most obsolete and inefficient plants. Further, China's US$586 billion economic stimulus has helped create a capacity glut.
"Overcapacity and redundant projects remain prominent because of slow progress in industrial restructuring...," the State Council said. It plans, this time, to use controls on market access, reinforced environmental supervision and new land use controls to slowly strangle away capacity. Banks were directed to lend money for the targeted sectors only in strict adherence with industrial policy.
But the problem of reducing output is illustrated by the current struggle for control of Rizhao Iron and Steel Group, a privately held steelmaker that produces about 8 million tons annually. The Shandong provincial government wants to build a large steel group, with an annual capacity of 20 million tons, in Rizhao city. Shandong Iron and Steel Group, the provincial government's steelmaker, has been trying to buy out Rizhao, its competition, opposed by Du Shuanghua, Rizhao Steel's founder. To help, the provincial government has applied muscle in the form of special inspections of Rizhao facilities to find environmental issues that would justify its shutdown... unless it merges with Shandong. Local officials say that if Shandong can't buy Rizhao Steel, it may simply build a new plant, thus significantly adding to the area's capacity while achieving the provincial steelmaking goal. Du, who has run a profitable operation through the economic downturn, has been courted by his native Hebei province, which wants him to move his company and production there.can’t see the opportunity.
