Guangdong plans further capacity reduction

Province to trim obsolete manufacturing facilities for iron, steel and cement by 2017, commission says

Guangdong province will make further cuts in obsolete manufacturing capacity for iron, steel and cement by 2017.

Iron and steel capacity will be reduced by 4.5 million metric tons and that of cement by 3.23 million tons as part of a national drive to eliminate excess capacity, the provincial development and reform commission said on Tuesday in a draft plan.

With 12.94 million tons of capacity already phased out, provincial iron and steel capacity should be less than 40 million tons by 2017, it said.

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Cement clinker capacity should be kept below 110 million tons by 2017, said the draft, which was formulated in response to guidelines issued in October by the State Council, China's cabinet, on tackling overcapacity, mainly in iron and steel, cement, electrolytic aluminum, sheet glass and shipbuilding.

Meanwhile, construction of an advanced iron and steel complex in Zhanjiang, Guangdong, by Baosteel Group Corp, the country's largest steel maker, will be accelerated, the draft said. The first blast furnace will go into operation by the end of 2015, and the entire project will be completed by June 2016.

The draft imposed a strict ban on new capacity in industries with serious overcapacity. It also said that industries with excess capacity should seek a transformation through technology and innovation.

Differential electricity rates for facilities that are being phased out should be strictly enforced, environmental supervision should be strengthened, and appropriate plans should be made for redundant workers. The draft said that power should be cut off to facilities that aren't shut down on schedule.

The draft lays out the detailed goals of the Guangdong government and "sounds an alarm" to some local governments in Guangdong about their obsession with GDP growth, which has led to overcapacity, said Chen Hongyu, an economics professor with the Guangdong Institute of Public Administration.

Guangdong has the nation's largest provincial economy.

Phasing out obsolete capacity will release resources for use in strategic new industries, which will contribute to the public's welfare, Chen said.

Financial, environmental protection, and land and resources organizations should play an active role in carrying out the measures, he said. Where there's a negative impact, governments should take proper steps to safeguard the people involved.

He Xiaotong contributed to this story.