China's Jiangsu province to consolidate steel mill locations in efficiency drive

16 August 2018

China’s second-largest steelmaking province, Jiangsu, will require steel mills to move to two new areas on the coast in the next few years, according to a provincial government document, to reduce air pollution and to make the industry more efficient.

After years of getting rid of outdated excess capacity, the latest measures are the next front in the government’s long-term effort to upgrade and streamline its smokestack industries.

Jiangsu province, which accounted for 12.5 percent of China’s total crude steel output last year, plans to create two steelmaking hubs, focusing on high-quality steel production, and relocate steel mills through merger and capacity trading, the document said.

The plan was distributed on Tuesday by the Jiangsu government and reviewed by Reuters on Wednesday. The provincial government declined to comment.

“(Jiangsu) will guide and encourage steel companies to adopt electric-arc furnaces (EAFs) and to produce high-end steel products used in military defense, rail, nuclear, aerospace and new energy vehicles industries,” the document said.

Electric-arc furnaces, or mini-mills, emit far less harmful air than traditional blast furnaces which use coking coal as fuel.

The move is similar to one outlined by Hebei, the country’s top steel producing province, earlier this year.

Last month, Zenith Steel Group based in the city of Changzhou in Jiangsu, with annual capacity of 11.8 million tonnes, said it will move some production to a new steel factory in Nantong on the coast of the province.

In the document, Jiangsu explicitly ordered the city of Xuzhou to cut number of steel mills in the city to under 10 by the end of 2018 from 18 currently and consolidate the remaining into one to two companies by 2020. In April, at least three steel mills were ordered closed in Xuzhou.

Small steel mills and coke plants near the Yangtze river and Tai Lake region will be eliminated by 2020.

The province also plans to keep its coal-fired power capacity below 80 gigawatts by 2020 and lower the portion of its power produced from coal to 58.5 percent of total capacity from 67.6 percent currently. It plans to build more solar and wind power generation on the coast to meet the targets.