China orders output cuts

(MENAFN- Khaleej Times) China ordered more than 1,400 companies in 19 industries to cut excess production capacity this year, part of efforts to shift towards slower, more- sustainable economic growth.Steel, ferroalloys, electrolytic aluminum, copper smelting, cement and paper are among areas affected, the Ministry of Industry and Information Technology said in a statement on Thursday, in which it announced the first-batch target of this year to cut overcapacity. Excess capacity must be idled by September and eliminated by year-end, the ministry said, identifying the production lines to be shut within factories. China's extra production has helped drive down industrial goods prices and put companies' profits at risk, while a survey this week showed manufacturing weakening further in July. Premier Li Keqiang has pledged to curb overcapacity as part of efforts to restructure the economy as growth this year is poised for the weakest pace since 1990. "This is a real move and is very specific compared with previous high-level conceptual framework for economic restructuring," said Raymond Yeung, a Hong Kong-based economist at ANZ Banking Group Ltd. "They maintain the overall tone that they're not focusing on the quantity of growth but the quality of growth." The move also reflects that Li has settled in the job and is willing to deepen the reform on overall economic structure, which he promised after taking over the premiership in March, Yeung said. More than 92 million tonnes of excess cement capacity and about seven million tonnes of excess steel production capacity are expected to be wiped out under the government's plan, Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong, wrote in an e-mailed research note on Thursday. Nomura maintained its forecast of 7.4 per cent economic growth for China in this quarter and 7.2 per cent in the fourth quarter. China also plans to shut 654,400 tonnes of copper and 260,000 tonnes of aluminum capacity as part of its first-batch target, according to Bloomberg calculations based on the ministry's statement on Thursday. The first-batch target for cement is bigger than a full- year number the ministry had announced April 11. In the April statement, China ordered the closing of 73.45 million tonnes of cement, 7.81 million tonnes of steel, 273,000 tonnes of aluminum and 665,000 tonnes of copper this year. Xinjiang Tianshan Cement Co., which trades on the Shenzhen Stock Exchange, is among companies on lists published by the MIIT accompanying the statement. It was told to phase out 450,000 tonnes of capacity. One factory of state-owned Wuhan Iron & Steel Group Corp., has been told to eliminate 400,000 tonnes of steel capacity, according to the MIIT. China's economic planners have sought to rein in steel industry growth since at least 2004, when work on a 10.6 billion yuan project in the eastern province of Jiangsu was halted. Yet annual capacity has risen to 970 million metric tonnes, according to the steel association, exceeding the industry's output of 716.5 million tonnes in 2012.