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China to Shut Old Steel, Power Plants in 2007 - Wen

Date: 05-Mar-07
Country: CHINA
Author: Benjamin Kang Lim and Lucy Hornby

In 2007, 30 million tonnes of outdated pig iron capacity will be closed, and 35 million tonnes of crude steel capacity, premier Wen Jiabao is due to say as part of a speech to the National People's Congress, China's parliament.

China's steel industry has expanded rapidly, despite attempts by Beijing to rein in the sector and force smaller or older firms out of business.

A one-fifth jump in steel output in 2006, to 423 million tonnes, has spurred a surge in steel product exports, sparking trade tensions.

Wen and other leaders blame heavy industry for China's failure to meet energy efficiency and emission reduction goals in 2006, according to excerpts of the speeches seen by Reuters.

Small thermal power plants would also be phased out, with 10 gigawatts of capacity -- or less than 2 percent of national generating capacity -- to be shut in 2007, Wen is due to say.

The steel closure targets are part of a plan to reduce pig iron capacity at outdated facilities by 100 million tonnes and outdated steel capacity by 55 million tonnes in the five years from 2006 through 2010.

During the current five-year planning period, which ends in 2010, 50 gigawatts of thermal generation capacity are slated to be shut.

China would also speed the closure of outdated plants in the cement, aluminium, ferro-alloy, coking and calcium carbide industries this year.

In 2006, 110 million tonnes of coking capacity and 1.2 million tonnes of aluminium smelting capacity were mothballed, according to excerpts of the report by the National Development and Reform Commission, the nation's top planner.

The NDRC will recommend that China raise the barriers to entry for energy-wasting or heavily polluting industries, through land and credit controls and market mechanisms.

But it will also call for expansions in transport of resources and power generation, areas where past shortages have threatened to trip up China's economic expansion.

Although bottlenecks in coal and oil transport and in electricity transmission have eased, some regional, short-term and structural shortages still exist, the NDRC said.

The NDRC report will also call for modernizing large coal mines and consolidating mid-sized and small mines.

It will urge faster development of oil and gas resources and pipelines, and the construction of oil storage systems.

It will promote alternative power sources, such as nuclear power and nuclear fusion, biofuels, wind energy and geothermal energy, in addition to conventional programs such as upgrading the power grid, and thermal and hydropower projects.

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Reuters
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