China Removes Steel Makers From ‘Qualified’ List for First Time

(Beijing) — China said Monday it removed 29 firms from its list of “qualified steel makers” — the first time it has taken such action — and threatened another 40 with removal if they did not reform.

The government said the 29 companies hadn’t met environmental standards or had halted production for too long.

The Ministry of Industry and Information Technology (MIIT) started compiling its list of “qualified steel makers” in 2009 in an attempt to regulate quality and curb overproduction. After topping out at 304 company names in 2015, the list now stands at 275.

The delisted companies don’t immediately have to close, and punishment for continued noncompliance is unclear — with the warning simply saying that producers must meet standards for environment, safety, quality, energy consumption and technology, MIIT said in its statement Monday.

The companies can apply to be relisted in 12 months.

Five of the 29 delisted companies are in Hebei province, which surrounds Beijing and often shrouds the capital in smog. Some are subsidiaries of big-name industry players such as Baosteel Group Corp. and HBIS Group Co. Ltd.

Most of those punished had halted or quit production altogether due to overcapacity reductions, or were found to be using equipment that was prohibited for safety or environmental reasons.

China began a nationwide campaign in March 2016 to trim excess industrial capacity, especially in steel and coal sectors. It met its 2016 target of cutting 45 million tons of steel production capacity and 250 million tons for coal. This year’s goal aims to slash 50 million tons of steel and 150 million tons of coal production.

The 40 companies who were not delisted but were warned include subsidiaries of steel giants Shougang Group, Benxi Steel Group Corp. Ltd. and Dongbei Special Steel Group Co. Ltd.

MIIT said it will consider removing them from the list if they repeat environmental or safety violations within a year.

China struggles to regulate polluting companies. In an inspection this month of 295 companies throughout the country, the Ministry of Environmental Protection (MEP) found that around 60% hadn’t met environmental standards, with most problems occurring in Shandong and Hebei provinces in the north, the MEP said Sunday.

One reason the government has compliance issues is weak regulatory incentives. For instance, being on the qualified steel-maker list doesn’t ensure market access.

Contact reporter Coco Feng (renkefeng@caixin.com)