Producers on target for steel reduction

Enterprises directly under the supervision of the State-Owned Assets Supervision and Administration Commission have reached their goal for trimming overcapacity, well ahead of the year's end, according to a top commission official.

There are 103 SOEs directly under the supervision of the commission. They include three steel companies: Baosteel Group, Wuhan Iron and Steel Group and Ansteel Group, as well as two steel-related companies - China Minerals Corp and Xinxing Cathay International Group.

The short-term goal of capacity reduction is to cut crude steel capacity by 15 percent, or a reduction of 27 million metric tons, within three years starting from 2016. This year's goal was a reduction of 7.19 million tons.

Li Bing, chief of the commission's corporate reform office, said the overall reduction of capacity would be completed by the companies' own reductions - 16.4 million tons, 9.39 million tons by mergers and reorganization and 1 million tons by cross-border export cooperation.

"The future capacity reduction goal is expected to increase," Li says.

The total crude steel capacity of the five steel and steel-related companies in 2015 stood at 138 million tons, accounting for 12.2 percent of the total steel capacity in China.

Baosteel announced in July that it would reduce production by 9.2 million tons between 2016 and 2018. In August, it announced that it had reached this year's goal of cutting 3.95 million tons. Wuhan Iron and Steel said in May that it would reduce capacity by 4.42 million tons. It has not get published its progress in this regard. Other steel-related SOEs have not disclosed their goals this year, or their progress.

Li said that capacity reduction had become a key criterion for individual performance reviews of SOE leaders in the steel industry. "The boards of SOEs must strictly review potential investment projects," he says.

"If any of them add new steel capacity or expand existing capacity, the board of the company will be subject to reorganization."

On the other hand, leaders of companies that made significant progress in capacity reduction will be awarded bonus points in performance reviews, along with salary increases, he says.

Xu Xiaoqing, a steel analyst at 315.com.cn, an information website of bulk commodities, said that Wuhan Iron and Steel was expected to outperform its capacity reduction goal this year, and Ansteel was also expected to reach its goal. "The merger of Baosteel and Wuhan Iron and Steel in September is a signal: Mergers and reorganization will be the main direction for the industry in the future. The days of blind expansion will be over," Xu says.

yangziman@chinadaily.com.cn