China’s Ministry of Industry and Information Technology had released a draft version of the capacity swap scheme for the China’s steel industry in October 2020, listing the detailed guidelines to adhere to for the installation of all the new domestic iron and steelmaking capacities to shape the country’s steel industry in the future. Capacity swap refers to the removal of old or inefficient iron or steelmaking capacities by steelmakers and the installation of new facilities of similar capacity, a crucial measure in the central government’s strategy to rein in the country’s bloated steel industry. Beijing is also eager that benefits to the industry’s structure achieved by the removal of over 150 million tonnes per year of excessive iron and steel capacity over 2016-2018 and 140 million tonnes of substandard induction furnace capacity in 2017 are safeguarded. The ministry also hoped that reformulating the key provisions of the guide would help to slim down the industry further while promoting environmentally-friendly steel production and industry integration through mergers and acquisitions. The ministry will accept public feedback regarding its draft until January 18, 2021. Once ratified, this new guideline will replace that in force since the beginning of 2018

Significant changes have been made in this new guideline. The capacity swap ratio for areas that are susceptible to atmospheric pollution is raised to 1.5:1 from 1.25:1 in the existing guide. The ratio for other areas is also raised to 1.25:1 from 1:1. These ratios could be increased to further reduce China’s total steel capacity

The guideline also encourages Chinese mills to switch from blast furnace based steelmaking to more eco friendly steel production employing technologies such as electric arc furnace, Corex, Finex and HIsmelt based steelmaking, with equivalent swap ratio of 1:1. The equivalent swap principle also proposed for projects that use RKEF+AOD to produce stainless steel

The draft plan calls for stricter air pollution prevention in key steel-producing areas including the Beijing-Tianjin-Hebei region, the Yangtze River delta, the Pearl River delta, the Fen-Wei plain and other 2+26 regions. The other 2+26 regions and Fei-Wei plain are newly added areas to the implementation policy.

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