To further resolve overcapacity in the steel industry and promote steel enterprises to achieve turnaround development, the State Council recently issued the "Opinions on Resolving Overcapacity in the Steel Industry and Achieving Turnaround Development" (Guo Fa [2016] No. 6), requiring that on the basis of eliminating outdated steel capacity in recent years, starting from 2016, use 5 years to further reduce crude steel capacity by 100-150 million tons. This is the second time the State Council has issued a document on resolving overcapacity since the "Guiding Opinions on Resolving Serious Overcapacity Contradictions" (Guo Fa [2013] No. 41) was released in 2013.

The opinions point out that resolving overcapacity in the steel industry should focus on promoting supply-side structural reform of the steel industry, adhere to market-driven and enterprise-led approaches, local organization and central support, highlight key points, comply with laws and regulations, comprehensively use market mechanisms, economic means, and legal methods, adapt to local conditions, implement classified policies, address both symptoms and root causes, actively and steadily resolve overcapacity, and promote quality and efficiency improvement in the steel industry.

The opinions emphasize that new capacity is strictly prohibited. All regions and departments shall not file new steel projects with new capacity under any name or in any manner, and relevant departments and institutions shall not handle related business such as land supply, energy assessment, environmental impact assessment approval, and new credit support. For illegal and non-compliant construction, serious accountability shall be enforced. Exited capacity that has received reward and subsidy funds and relevant policy support shall not be used for replacement.

The opinions propose three measures for resolving overcapacity: First, exit according to laws and regulations, strictly implement laws, regulations, and industrial policies on environmental protection, energy consumption, quality, safety, and technology, and steel capacity that does not meet standard requirements must exit according to laws and regulations. Second, guide proactive exit, improve incentive policies, and encourage enterprises to exit part of their steel capacity through proactive reduction, mergers and reorganizations, transformation and conversion, relocation and renovation, and international capacity cooperation. Third, dismantle corresponding equipment. Steel capacity exit requires the dismantling of corresponding smelting equipment. Equipment that meets dismantling conditions should be dismantled immediately; for equipment that temporarily does not meet dismantling conditions, water and electricity should be cut off immediately, power devices removed, smelting equipment sealed, and enterprises should publicly promise to the society not to resume production, and simultaneously publicize on the website of the provincial people's government or provincial competent department to accept social supervision, and dismantle within a time limit.

The opinions point out that methods such as "promoting intelligent manufacturing, enhancing quality and brand, developing high-end varieties, promoting green development, and expanding market consumption" should be adopted to actively promote industry upgrading. The opinions require that in conjunction with the implementation of shantytown renovation, dilapidated housing renovation, and earthquake-resistant housing projects, pilot projects for the promotion and application of steel structure buildings should be carried out to significantly increase the proportion of steel structure applications.

The opinions clarify a series of policy measures to support the steel industry in resolving overcapacity and achieving turnaround development, including strengthening reward and subsidy support, improving tax policies, increasing financial support, properly resettling employees, and revitalizing land resources.

The opinions emphasize that relevant provincial people's governments and the State-owned Assets Supervision and Administration Commission of the State Council are respectively fully responsible for resolving steel overcapacity in their regions and relevant central enterprises. All regions should publicize the annual completion of overcapacity resolution tasks to the society, establish a reporting system, and hold accountable local governments and enterprises that fail to complete tasks.