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China's Hebei province aims to shut 60% of steel mills by 2020

[BEIJING] Hebei will aim to shut 60 per cent of its steel mills by 2020, the governor of China's top steelmaking province said on Tuesday, as part of the country's efforts to cut overcapacity, which has driven prices to their lowest in decades.

The province will also keep steel production capacity to within 200 million tonnes by 2020, Governor Zhang Qingwei told reporters at a meeting at China's annual parliament in Beijing.

"Given current overcapacity, we shall not allow any new projects in sectors suffering from overcapacity," said Hebei province party secretary Zhao Kezhi. "Given current environmental pollution, we shall not allow any new high-energy-consuming, highly polluting projects."

Hebei, which surrounds the capital Beijing, churns out nearly a quarter of China's steel output but it is now bearing the brunt of a campaign to cut the country's dependence on heavy and polluting industrial capacity.

China promised in early February that it would cut crude steel capacity by 100 million to 150 million tonnes within the next five years, as well as ban new steel projects and eliminate so-called "zombie" mills.

"Zombie enterprises" are stricken firms that can't afford to keep running but are kept artificially alive by local authorities desperate to avoid unemployment and bad debt.

Though the central government has stepped up its efforts to rein in the bloated steel sector, Hebei's pledge to keep capacity within 200 million tonnes is unchanged from one made in 2014 when the province came under pressure to curb hazardous air pollution.

According to the last available official figures, total annual crude steel capacity in Hebei stood at 286 million tonnes by the end of 2013, though the real number was believed to be higher.

In 2014 it vowed to close 60 million tonnes of capacity by 2017 and 86 million tonnes by the end of the decade.

Hebei's 2015 steel output rose 1.3 per cent to 188.3 million tonnes, National Bureau of Statistics data showed.

The China Iron & Steel Association said in January the country's total annual crude steel capacity now stands at 1.2 billion tonnes. Total production reached 803.8 million tonnes last year, down 2.3 per cent, the first drop since 1981.

The drive to cut industrial capacity will force China to lay off probably 1.8 million workers from coal and steel sectors, and the central government will allocate 100 billion yuan (US$15.37 billion) to deal with laid-off workers in the next two years.


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