China steel company Copyright Getty Images

China Punishes Coal, Steel Companies in Overcapacity Cut Drive

The nation wants to eliminate outdated and inefficient producers in industries that are struggling with a glut of capacity in an effort to shift toward consumer-led growth and curb pollution.

China has punished coal and steel companies for illegal production or unsafe operations as part of the government’s efforts to reduce industrial overcapacity.

Following safety checks at 4,624 coal mines, the regulator revoked the licenses of 28 and halted production at 286, the National Development and Reform Commission said in a statement on its website. Thirty-three coal companies and seven steel mills were censured for illegal land use, while 54 coal firms were punished for unlawful mining, it said. A further 175 steel companies were found to have violated environmental standards.

The nation wants to eliminate outdated and inefficient producers in industries that are struggling with a glut of capacity in an effort to shift toward consumer-led growth and curb pollution. It’s seeking to reduce about 9% of its coal mining capacity and as much as 13% from steel making within five years.

The world’s largest coal producer has already urged state-owned miners to accelerate mine closures to meet year-end targets. China cut 150 million metric tons of coal capacity, meeting 60% of its annual target, at the end of August, Caixin reported, citing National Development and Reform Commission official Lu Junling.

The country’s steel industry was told in August to speed up closures after falling short of its target to cut 45 million tons of annual capacity this year. Only 21 million tons were closed by the end of July, the commission said. There hasn’t been much evidence of capacity cuts accelerating to date, Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd., wrote in a report Thursday.

By Bloomberg News

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