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January 12, 2017

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China to scrap output of low-quality steel

CHINA plans to cull production of low-quality steel made from scrap metal, known as “ditiaogang” in Chinese, before the end of June, as part of efforts to improve market supply and a national battle to slash overcapacity in the steel industry.

It is the first time that a specific time has been revealed to phase out such shoddy steel production, mainly in small steel mills, which is vexing a market suffering from overcapacity.

To meet the target, the central government has dispatched 12 supervision groups to investigate the problem in provinces such as Hebei, Henan and Heilongjiang as well as the Guangxi Zhuang Autonomous Region, Lin Nianxiu, vice director of the National Development and Reform Commission, said at a meeting of the China Iron and Steel Industry Association addressing steel capacity cuts this year.

Two ditiaogang producers in Jiangsu and Hebei provinces were punished by authorities in December.

“Inspectors have found local implementation of a production ban on ditiaogang worrisome,” Xu Lejiang, vice minister of industry and information technology, said at the meeting.

Xu said producers still saw a total phasing out unlikely because it caused unintended “collateral damage” to certain plants.

He said that most of the targeted steelmakers were small mills with medium frequency furnaces, and that inefficient furnaces were highly polluting and turned out subpar products.

Wang Guoqing, research director at, a steel industry website, said correcting the problem would encourage high-quality production and help upgrade the industry.

Production of ditiaogang rose last year amid a steel price recovery, which “jumped 70.1 percent,” she said.

Ditiaogang output totaled 120 million tons last year, estimated Mysteel, a real-time news portal for the nation’s steel market.

While ditiaogang sells for 1,500 yuan (US$216) a ton, speculators resell it in the quality steel market where the rebar price was around 3,000 yuan per ton recently.

This means “both illegal producers and speculators earn large profits,” Wang said.


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