Posted on 06 Mar 2015
Chinese steelmakers are facing
more headwinds this year as economic growth slows and need
government support to tackle long-term overcapacity, the
chairman of Anshan Iron & Steel Group said. China's steel sector has been struggling with tepid growth
in demand, increasing environmental protection costs and
persistent overcapacity, forcing many uncompetitive producers to
have closed since last year. "The government should strengthen the elimination of
outdated capacities, and particularly those enterprises that
have failed to meet environmental standards in terms of the new
environment law," Zhang Guangning, chairman of Anshan Steel
Group, said during a gathering of Liaoning provincial delegates
to the annual meeting of China's parliament on Thursday. However, local Chinese authorities have always been
desperate to strike a balance between shutting down outdated
steel mills to address overcapacity and shielding themselves
from surging unemployment and shrinking tax revenue. China's total annual steel capacity is between 1.1 billion
and 1.2 billion tonnes. "There are three issues to be solved for the shutdown: how
to settle (unemployed) workers, how to deal with debt, and they
also need capital for restructuring and upgrading," Zhang added. Zhang also urged the government to cut taxes for domestic
miners as the tax duty has resulted in high-cost miners being
unable to compete with top global miners. "If the taxes are not cut, Chinese domestic miners will have
to shut down, which will cause unemployment and bank debt, and
the crucial thing is the big three miners will further
monopolise the market after squeezing out others, which will be
very serious to the steel industry." State-owned steel producers Anshan Steel, parent of Angang
Steel, Shougang Corp and Hebei Iron and
Steel own a big chunk of the country's iron ore
mines. The average taxes on iron ore miners are as high as 25
percent, far higher than top miners. The top three mining giants Rio Tinto , BHP
Billiton and Vale are expanding their
production despite a slowdown in the world's top consumer. China's domestic supply is expected to fall by another 70
million tonnes this year, or about a fifth of the country's
output in terms of equivalent imported ore grade, the China Iron
and Steel Association has said.
