China’s Top Steel Hub to Slash 16% of Capacity in Second Half

Hebei province, northern China’s steel industry hub, aims to cut its crude steel production capacity by 21.7 million tons this year, equivalent to a drop of 8.8% from last year’s level, as part of a national campaign to reduce pollution.

To meet that target, Hebei, China’s largest steel production base, needs to cut crude steel production capacity by 16% during the second half. According to an official document seen by Caixin, about 57% of the capacity reduction will take place in Tangshan, the world’s biggest steel-producing city.

The document, issued by the Tangshan city government’s air pollution prevention office, outlined the production cut goals as part of a broader plan to improve air quality before the 2022 Winter Olympics next February in Beijing.

China has been pushing for nationwide steel production cuts to meet its ambitious carbon neutrality goals. Since June, several major steel production provinces including Gansu, Anhui and Shandong have released local targets for reductions.

Although the Hebei provincial government has yet to publish a formal plan, the Tangshan document indicates the direction, a person close to the Hebei government said.

In 2020, Hebei produced 250 million tons of crude steel, according to industry portal mysteel.com. To meet the reduction target, the province needs to keep its 2021 output below 228 million tons.

Tangshan, with 2020 annual production of 144 million tons, accounted for 13.5% of China’s total crude steel output and 57.7% of Hebei’s. In the first half this year, the city’s steel production declined 7.2% from the same period last year. A further 9.9% cut is needed in the second half for the city to meet the goal.

Tangshan in March ordered local steel mills to slash production by at least 30% between March 20 and Dec. 31 as part of efforts to reduce pollution. However, city authorities were under pressure to meet the goal amid a surge in steel prices this year driven by tight supply.

Since 2020, China has sought to rein in the steel industry, which accounts for about 15% of the country’s carbon emissions. Carbon dioxide is the main greenhouse gas causing climate change. The government set goals to top out carbon emissions by 2030 and reach carbon neutrality by 2060. China has vowed to produce less crude steel in 2021 than last year, when output topped 1 billion tons.

Nonetheless, the country’s crude steel production during the first half this year reached 563 million tons, up 11.8% from a year ago, highlighting the struggles steel firms and local governments face to balance economic and environmental concerns.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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