China to release guidelines on steel industry consolidation

China will soon release guidelines to push mergers and restructuring plans for the steel industry to facilitate the creation of larger and stronger groups that can compete in the global market, according to a report by the Economic Information Daily.

The guidelines, aiming to clear obstacles in steel consolidation, will encourage cross-region and cross-ownership mergers and restructurings by qualified enterprises, the paper cited unnamed authorities.

Market funds will also be welcome to take part in the effort to offer more financial support for the move, the paper said.

Compared with world-leading steel groups, there is still a wide gap in competitive power for Chinese companies, and industry consolidation should be an important solution, the paper cited Li Xinchuang, deputy head of the China Iron and Steel Association.

In 2016, China set a target that 60 percent to 70 percent of steel should be produced by the top 10 steel groups by 2025.

Following decades of reckless investment-driven expansion, China's steel mills have been running at overcapacity in recent years, prompting the government to take measures to cut outdated capacities.

The country fulfilled its goal of reducing the steel industry's capacity by 100 million-150 million tonnes from 2016 to 2020 ahead of schedule.

Thanks to the capacity-cut drive, the steel market has gradually recovered and rendered high profits for producers.

China's steel industry reported profits of 470.4 billion yuan (around 70 billion U.S. dollars) in 2018, surging 39.3 percent year on year, while crude steel output grew 6.6 percent to 928.26 million tonnes, a record high, official data showed.

Apart from capital support, the guidelines will also stipulate production limits in regions including Beijing, Tianjin and Hebei for environmental concerns, according to the paper.