May 19, 2026 - Recently, the Ministry of Industry and Information Technology of the People's Republic of China issued the new Implementation Measures for Steel Capacity Replacement, introducing stricter replacement requirements and stronger regulatory oversight as China continues to deepen supply-side reform in the steel industry.

The updated policy comes as China’s steel sector faces increasing pressure from weak demand, overcapacity concerns, and intensified market competition. Authorities stated that the revised measures are intended to improve the precision of capacity governance, encourage industrial upgrading, and support the transition toward greener and higher-value steel production.

Under the new rules, the minimum replacement ratio for both ironmaking and steelmaking capacity will rise to 1.5:1 nationwide, while projects linked to mergers and acquisitions will require a minimum replacement ratio of 1.25:1. This means companies must eliminate significantly more old capacity before bringing new capacity online.

One of the most significant changes is the gradual restriction of capacity replacement between different companies. A two-year transition period will apply, after which cross-company capacity transfers will only be permitted through substantive mergers and acquisitions. Chinese authorities said the move is designed to curb speculative capacity trading and promote genuine industry consolidation.

The revised measures also introduce a 24-month validity period for approved capacity replacement plans. During this period, projects must complete filing procedures, energy-saving reviews, carbon emission assessments, environmental approvals, and officially commence construction. Projects failing to meet these requirements within the deadline may lose their approved capacity quotas automatically.

In addition, the policy tightens supervision over stainless steel producers by requiring alloy melting induction furnaces to match actual electric arc furnace or converter production needs. The government aims to prevent companies from using alloy melting projects as a loophole to add unauthorized steelmaking capacity.

At the same time, the policy provides differentiated support for low-carbon and advanced steelmaking technologies. Projects involving hydrogen metallurgy, electric arc furnaces, and certain specialty steel facilities may qualify for more flexible replacement ratios in order to encourage green transformation and technological upgrading.

The revised measures also strengthen implementation oversight. Provincial industry authorities will be responsible for verifying project execution, conducting annual self-inspections, and reporting compliance results to central authorities. Coordination with environmental, energy efficiency, and carbon management policies will also be enhanced through closer cooperation among multiple government departments.

China reaffirmed that the official “filing list” established during the country’s earlier steel capacity reduction campaign remains the core basis for determining eligible replacement capacity. Authorities also clarified that long-idled “zombie” capacity cannot be used for future replacement projects.

The new policy framework further specifies how previously announced replacement plans can be amended and outlines transitional arrangements for projects already submitted or approved before August 23, 2024, in order to ensure continuity and policy stability during implementation.