China’s Ministry of Industry and Information Technology (MIIT) has introduced stricter capacity replacement measures for the country’s steel industry, aiming to strengthen market balance and prevent uncontrolled capacity expansion.
Under the new policy framework:
- Nationwide capacity replacement ratios for both ironmaking and steelmaking will increase to 1.5:1
- Replacement ratios linked to mergers and reorganizations will rise to 1.25:1
The updated rules replace the previous 1.25:1 ratio applied to most producers.
China will also gradually phase out capacity replacement transfers between separate enterprises.
A two-year transition period will be introduced, after which capacity transfers will only be allowed through substantive mergers, acquisitions, or restructuring deals.
The policy additionally tightens controls on stainless steel producers, particularly regarding the use of alloy-melting induction furnaces.
According to MIIT, the number and scale of induction furnaces must now strictly match electric arc furnace (EAF) or converter production requirements, in order to prevent hidden additions of steelmaking capacity.
Market participants described the move as a continuation of China’s broader efforts to stabilize the steel sector, although traders noted the policy is unlikely to trigger immediate production cuts.
A Chinese market source stated that mills are still expected to adjust production mainly according to market demand, with the new measures serving as an additional regulatory control mechanism.
VietnamSteel by Hoa Sen Group
