China's Hebei Steel gets approval for $6 billion upgrade project

22 March 2017

Hebei Steel Group, China's biggest steelmaker by output, has won approval for a 42.4 billion yuan ($6.2 billion) project that will reduce its steel capacity by nearly 2 million tons and upgrade old technology, Hebei province's economic planner said.

China, the world's biggest producer and consumer of steel, is prioritizing supply-side reform in its steel and coal sectors, seeking to tackle pollution and cut an output capacity glut that has weighed on both domestic and global prices.

The Development and Reform Commission (DRC) of Hebei, China's largest steelmaking province, approved the project for four units of the Hebei Steel Group in a March 16 document that was published by China Steel News on March 19.An official surnamed Wei from the project registration office of the DRC confirmed the document's content to Reuters.

The four entities, including two units of listed subsidiary Hesteel Co Ltd and Xuansteel Co, have vowed to phase out 9.15 million tons of iron capacity and 9.34 million tons of steel capacity, according to the document.

"To cut excess capacity, upgrade technology and clean up the air for the coming Winter Olympic Games, Hebei Steel Group has planned to upgrade and relocate Xuansteel," Wei told Reuters, declining to give his full name.

"Xuansteel will build new modernized plants in Laoting. After the new facilities pass assessments, a number of out-dated steel mills of Hebei Steel Group will be halted," Wei said.

Xuansteel will build four new blast furnaces and five new converters with total iron and steel capacity of 7.32 million tons and 7.47 million tons, respectively.

Then, when the outdated steel mills are phased out, that will cut Hebei Steel's annual iron capacity by 1.8 million tons and drop its steel capacity by about 1.9 million tons.Laoting is a seaside county in the Tangshan city area in Hebei province.

Hebei is home to 104 mills that account for nearly a quarter of China's total steel output. The province has pledged to cut steel and iron making capacity by 31.17 million tonnes by 2017 and by 49.13 million tons by 2020.

China has launched a campaign to shut down substandard steel output in its war on pollution and industrial overcapacity. It is planning to close 100-150 million tons of annual steel production capacity over the 2016-2020 period.