China Tightens Steel Capacity Swap Rules as Profits Shrink
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China has tightened rules on steel capacity swaps, seeking to close loopholes that have allowed production capacity to persist or even expand as the industry struggles with oversupply and weak profits.
The Ministry of Industry and Information Technology (MIIT) on Monday released new rules governing steel capacity replacement, imposing tougher swap ratios nationwide and adding stricter oversight of idle, split or repeatedly traded capacity quotas.
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- China's MIIT tightened steel capacity swap rules, requiring a nationwide minimum ratio of 1.5:1 (1.25:1 for mergers), replacing lower ratios for non-key regions.
- Rules aim to close loopholes allowing capacity persistence amid oversupply; steelmakers face thin profits with a 1.46% sales margin.
- Low-carbon technologies like hydrogen metallurgy and electric furnaces may receive differentiated replacement ratios.
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What Happened When
- 2015：
- China introduced its steel capacity-replacement system.
- 2017：
- China revised its steel capacity-replacement system.
- 2021：
- China revised its steel capacity-replacement system.
- Since 2022：
- China's property market weakened, contributing to excess supply in the steel sector.
- August 2024：
- The MIIT suspended the filing and publication of new steel capacity-replacement plans.
- First quarter of 2026：
- Key steel companies tracked by the China Iron and Steel Association reported total profits of 21.7 billion yuan, down 5.1% from a year earlier; sales profit margin was 1.46%.
- May 18, 2026：
- The MIIT released new rules governing steel capacity replacement, imposing tougher swap ratios nationwide and adding stricter oversight.
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