China's State Council set a goal in February of reducing steel production capacity 100 to 150 million tons in five years. Northern China's Hebei Province is the country's largest iron and steel production base and it's already feeling the pinch.
The Ren brothers are among the first in China to feel the impact of the new steel goal. They all work in the same iron and steel company in Handan city of Hebei Province. In the past, they earned enviable salaries. But things started to change back in 2013.
"The company told us that production is overcapacity, they don’t need that many workers now, workers are taking holidays," said Ren Hongwei, worker of Wenan Iron & Steel Co. Ltd.
According to the Labor and Social Security Bureau of Wu'an city, 4,600 workers have been laid-off and re-employed in 2015.
The company that the Ren brothers worked for is also struggling to survive. In 2015, the price of integrated steel dropped by nearly one third, the lowest since 1997. Among 16 iron and steel companies in the city, the Wenan company is among the best both in scale and profit. However, two of its three blast furnaces have been shut down for over half a year.
"We lost ten million Yuan by shutting down one blast furnace, but keeping it running will cost us even more, about two to three millionYuan a day. We can’t afford it, but have to cut production," said Wang Wenan, board chairman o Wenan Iron & Steel Co. Ltd.
State owned companies are relatively better off. Handan Iron & Steel Group is one of the largest in the region, and has more advanced production techniques and higher-end products.
These steel companies employ over 22 thousand workers. Although there has been no specific measure to cut production capacity here, the whole country is cutting iron and steel production capacity.
"During the lowest period for the iron and steel industry last year, 70 percent of production capacity stood idle in Wu'an. That was the worst ever time for Wu'an’s iron and steel industry," said Wei Xuesheng, mayor of Wu'an, Handan City, Hebei Province.
In 2015, China's crude steel production capacity was 1.2 billion tons. The goal is to reduce it by 10 percent in five years. In hebei province, the goal is even more aggressive. There the aim is to cut production capacity by 200 million tons by 2020, and 60 percent of iron and steel companies will be out of business.
