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Implementation of Steel Capacity Replacement 2018

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Implementation of Steel Capacity Replacement 2018
Issue Time:2018-03-13
The Ministry of Industry and Information Technology (MIIT) issued its Implementation of Steel Capacity Replacement and Implementation of Cement and Glass Capacity Replacement on January 8. The two regulations are stricter on new production capacity than the regulation introduced in 2015. 

Steel: Higher standards for capacity replacement. The new policy clarifies that: 1) the capacity replacement rule should not apply to substandard steel capacity, technologically outdated facilities or capacities to be cut or subsidized; and 2) new capacity in regions other than Beijing-Tianjin-Hebei, the Yangtze River Delta and the Pearl River Delta should be built by closing additional old capacities.

Cement: Additional capacity to be closed during replacement;capacities shut down before 2018 do not qualify for replacement.Moreover, outdated capacity, subsidized capacities or plants with out production permits do not qualify for the capacity replacement. 

Industry fundamentals to improve further. Real estate investment could increase while infrastructure demand would be resilient.Capacity cuts and environmental restrictions would continue, and the earnings of steel and cement could beat expectation.


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