1st LD-Writethru: China Focus: China punishes steel producers, officials for illegal production

Two steel producers will be punished for breaking capacity-cutting rules, and two deputy provincial governors will also be held accountable, according to a decision announced Monday.

The move is the latest effort by central authorities to push forward capacity reduction in saturated heavy industries, especially steel and coal.

China has been briskly slashing capacity since the beginning of the year, shutting down inefficient mines and factories, and stopping new project approvals.

By the end of October, a total of 45 million tonnes of steel and 250 million tonnes of coal capacity had been cut, meeting the country's annual targets ahead of schedule.

But problems have emerged. Some companies were found to be secretly adding capacity as an unexpected demand-supply gap pushed up prices of steel and coal.

Huada Steel in eastern China's Jiangsu Province, and Anfeng Steel in northern China's Hebei Province were singled out in a meeting of the Political Bureau of the Standing Committee of the Communist Party of China Central Committee.

Official reports showed Huada Steel had illegally churned out "ditiaogang," an umbrella term in Chinese that refers to low-quality iron products from small steel mills, and Anfeng Steel had built new projects without government approval.

The companies "exerted extremely bad influence and disrupted the reduction of excess capacity in the steel sector," a statement released after the meeting said.

Central authorities decided to circulate notice of the two cases nationwide to eliminate such practices.

The statement said the cases exposed local government oversight, ineffective implementation and low efficiency.

Jiangsu was ordered to crack down on sales and production of "ditiaogang" and illegal capacity increases, and Hebei to tear down Anfeng Steel's inefficient blast furnace with a capacity below 1,000 cubic meters and converters under 100 tonnes.

The State Council asked the two provinces to make "self-criticisms," and held 111 officials to account in Jiangsu, and 27 in Hebei.

Ma Qiulin, Jiangsu's deputy provincial governor, will be recorded an administrative demerit, while Zhang Jiehui, Hebei's deputy provincial governor, will be given a disciplinary warning.

The State Council will launch a special campaign to supervise and examine capacity-cutting in the coal, steel, cement and glass industries of local governments.

Central authorities expect the two cases to caution businesses and officials involved in the country's capacity-cutting efforts and to ensure smooth work in the future.

Despite bold moves this year, China still faces an arduous journey to downsize glutted sectors, and cutting capacity remains a high priority for next year.

During 2016 to 2020, steel capacity will be cut by 100 to 150 million tonnes, while coal capacity will cut by about a half billion tonnes, according to official targets. Endi