The Strategist

China To Lay Off 400 Thousand Steelworkers

01/26/2016 - 15:04

China's plans to reduce steel production capacity can lead to dismissal of 400 th. steelmakers and trigger social instability. Steel production will be reduced to 150 million tons.

Rainer Halama
Rainer Halama
As a result of reduced steel production, 400 th. people will be laid off, said head of the Metallurgical Industrial Planning and Research Institute, Li Xinchuang. Above employees of steel companies, workers of mining companies and processing industries will suffer as well.

"Such large-scale reduction of capacity in the steel industry is a threat to social stability," - said Li Xinchuang.

At the same time, according to the Chinese news agency Xinhua, the authorities will render financial assistance to those workers who faced the redundancy.

In the near future, the Chinese Government intends to reduce steel production capacity by 100-150 million tons, as well as scale down coal mining facilities. This was discussed at the State Council’s last meeting held at the end of the last week.

The main criteria for the production capacities reduction should be extent of their compliance with modern standards of production safety, environmental, quality, energy consumption. Companies will have to reduce production capacity by decommissioning obsolete equipment, merging with other companies, moving production and transport capacities abroad.

In addition, the State Council meeting also stressed the need for strict control over introduction of new capacities for the steel production.

In 2015, steel production in China fell for the first time in 34 years. Last year, China produced 804 million tons of steel - 2.3% less than in 2014. Problems in the Chinese industry are related to the slowdown in the economy and overcapacity in some industries.

"Steel and coal sectors should be among the first in the reduction of excess capacity, reduce costs and improve efficiency," - said Prime Minister Li Keqiang on January 20.