On Tuesday, China's Industry Ministry announced that it will relegate 11 steel companies from a list of what the country considers as qualified enterprises. This decision is part of China's commitment to reduce what many analysts consider as a bloated steel industry.
Apart from the 11 companies that will be completely crossed off of the list, China also issued an order to 17 other companies to rectify their safety, environmental, and other violations or they will be facing the same fate.
The recent move is viewed by many analysts as part of China's effort to somehow trim down its bloated steel industry. On top of this, China might be working on regulations in order to improve the operating efficiencies of steel companies. China's steel sector is the biggest in the world. Based on recent data, China produces around 908 million tons of steel annually.
China's steel industry watch dog, Ministry of Industry and Information Technology, named these two steel companies as part of the banned list: Guangdong Century Tsingshan Nickel Industry Co, Xuzho Dongya Iron and Steel. The two companies were cited for at least three violations. These violations include having illegally adding production capacity, failing to obtain operating licenses from the local government, and under bankruptcy liquidation processes.
The 11 steel companies are given until Jan. 16, 2019 to raise any objections to not be removed in the list. Otherwise, the Chinese government will force these companies to cease operations.
In the last three years, China has removed close to 50 steel mills from the country's list of qualified enterprises. China's industry ministry said that these removals have reduced the country's total number of registered steel manufacturing companies to 256.
In a statement acquired by Reuters, China's industry ministry said, "With relentless work on cutting excess steel capacity in recent years, the total production capacity of qualified steel companies has been declining every year."
Apart from getting rid of some of the violating companies on the list, China is also planning to add 12 new companies in the country's western and southern regions. The addition of these 12 companies will add a total of 21.86 million tons of iron producing capacity and 22.12 million tons of steel producing capacity. The Ministry of Industry and Information technology said that this capacity figure comes from quotas which are available in the country's capacity transfer scheme.
