Japan, China Discuss Chinese Overcapacity

Delegations of Japanese and Chinese government and steel industry held 12th round dialogue on Tuesday in Tokyo. They discussed on Chinese efforts to reduce overcapacity and export including agreement for old steel facility shutdown with 10 provinces including Hebei, termination of steel export tax return and new tariff for steel export. Chinese explained the local governments have responsibility for asset management and shutdown process and the central government makes the rule and checks the progress under the shutdown agreement. The government will start the shutdown process as early as in the month after the launch of expert team. The government don’t approve new capacity plan when provinces fail to clear the shutdown target. Chinese explained the policy to reduce the output capacity by 30 million tonnes of iron making and by 35 million tonnes of steel making in 2007 toward the target of 100 million tonnes reduction for iron making and 55 million tonnes reduction for steel making by 2010 under the 11th 5-year plan. Chinese said the capacity reduction and export reduction policy will work through the shutdown process with rule making and check by central government and local government’s responsibility. The shutdown process could force steel makers to eliminate some facility if the makers fail to clear energy saving target by National Development and Reform Commission. Chinese said the raw steel output will increase by 10% to 460 million tonnes and the export will increase by 10% in 2007 from 2006. Chinese said advanced countries export 30% of the steel output and 10% is enough to be accepted when Japanese said Chinese steel export increases by more than 10% recently. Japanese delegations included Mr. Hisayoshi Ando, who is director of iron and steel division of Ministry of Economy, Trade and Industry, managing director Tetsuo Imakubo of Nippon Steel and vice president Tsutomu Yajima of JFE Steel. Chinese delegations included manager of industrial products export of department of foreign trade of Ministry of Commerce, officer of China Iron and Steel Association and vice president of Baoshan Iron and Steel. Chinese delegations hold dialogue with South Korea on Wednesday and hold dialogue with USA and Europe in July.