Efforts Being Made in Reducing Overproduction and Overcapacity in Coal, Iron and Steel
Based on a statement of Premier Li Keqiang, efforts are being made by the central government in strengthening efforts in reducing over production and over capacity. The central government will also be shutting down small coalmines that fall short of the safety requirements. Premier Keqiang was at Taiyuan during a meeting that was aimed to find viable solutions to the overcapacity in the iron, steel and coal industries. Governors coming from provinces that are rich in coal, iron and steel together with heads of leading companies were on hand to attend the meeting.
Stricter measures are being taken to control newly increased capacity and to clear goals that are set to reduce overcapacity in the coming three years as the nation needs to create limits on the maximum amount of production for iron, coal and steel industries based on the market demand. Outdated overcapacity will be closed especially iron and steel companies that doesn’t meet the production safety, environmental protection and energy consumption standards. Li also said that the government will be shutting down 13 types of outdated small coal mines, mostly privately owned and produce coal using low safety standards. More financial support from the government will be used specifically in shutting down overcapacity in the coal and mining industries and to help in the relocating of workers and support them in starting their own business. Provincial governments in resolving overproduction will implement stricter supervision plus there should be no favorable policies to guard against excess production.
The main cause of the price decline for iron, steel and coal products is hat there is no sufficient market demand in the recent years. Several local, iron and steel have been produced using comparatively low energy consumption standards. But the problem is that it was not seen when the market demand was strong by became more apparent in the recent years when market demand started to fall sharply. Overcapacity is caused by rapid increase in large scale production in the coal, iron and steel industries in the previous years as a lot of enterprises failed to meet modern production standards. Although these enterprises produced good profits for local governments in the past years, the central government reiterated the need to reduce such over capacity in the recent years as local authorities tend to protect these enterprises using favorable policies.