Hebei to move excess industrial capacity overseas

SHIJIAZHUANG - Authorities in North China's largest steel producing region have unveiled a plan to transfer excess capacity of its heavy industries abroad by 2023.

Hebei province in North China aims to move production of 5 million tons of steel, 5 million tons of cement and 3 million weight boxes (a weight box equals roughly 50 kg) of glass overseas by 2017.

The goal is more ambitious for the period leading up to 2023.

By 2023, Hebei will seek to shift production of 20 million tons of steel, 30 million tons of cement and 10 million weight boxes of glass capacity.

The initiative comes at a time when local steel, cement and glass producers are struggling, with sluggish growth in the world's second-largest economy crippling demand for their products. In many cases, it has led to severe overcapacity.

Yu Yong, chairman of Hebei Iron and Steel Group, said steel makers should make changes to cope with weak domestic demand and low profit margins.

On Tuesday, Hebei Iron and Steel signed a deal for a substantial increase in its stake in the Swiss-based steel trader Duferco International Trading Holding, achieving a majority 51 percent.

The trader will help Hebei Iron and Steel better understand global demand and help it relocate production capacity around the world, said Yu.

According to the plan, the government will offer preferential policies, including rewards, to encourage local steel companies to develop iron ore mines and set up steel mills in regions including the Southeast Asia, West Asia and Africa.

In September, Hebei Iron and Steel signed an agreement to build a 5-million-ton steel firm in South Africa. It planned to develop the base into a business with an annual sales revenue of $10 billion within three years.

Meanwhile, the local government will encourage cement and glass producers to establish subsidiaries or joint ventures in regions like Africa, Southeast Asia, South America and the Central and East Europe to meet local demand.

Hebei is a major source of industrial pollutants blamed for the notorious choking smog that often spreads to neighboring regions like Beijing.

The smog, a serious public health concern, has prompted the authorities to rethink and change the growth model and to take more stringent measures to fight pollution.

Hebei's economy is dominated by high polluting and energy-guzzling heavy industries, which contribute up to 77 percent of all emissions into the air, official data showed.

It has the largest steel capacity of all China's regions, at approximately 200 million tons, or one fourth of the country's total.

The local government has pledged to cut annual steel and cement production capacities by 60 million tons and glass capacity by 36 million weight boxes by 2017.

It also sought to reduce annual coal consumption by 40 million tons from 2012 levels within the same time frame.

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