Hebei province issued subsidies of CNY 55/tonne/year ($7.98/t/y) for capacity eliminated in 2015, but this year’s rate is still undecided, according to the Economic Information Daily. With elimination targets and timelines already listed, steelmakers, especially in the private sector, are having to cut capacity with no certainty of compensation, Kallanish notes.

Privately-owned steelmakers are facing difficult choices as they face up-front costs from closing capacity. Many private firms do not pay social security costs for their workers and limit pay-outs on redundancy. Even those that do however are struggling to meet payments as they cannot yet access promised government funds. Data from Custeel shows 70.9% of ironmaking and 80.2% of steelmaking capacity targeted for closure this year belongs to private steelmakers.

In March, Guofeng Iron and Steel's northern plant in Fengnan district was completely shut down, reducing capacity by 1.8 million tonnes/year of iron and 2.2m t/y of steel. According to Guofeng, 4,063 jobs are at risk of which about 500 will be relocated or retired early. The remaining 3,500 would be discharged with average payments of CNY 100,000/person. Guofeng has a CNY 348 million fund for workforce resettlement.

A Guofeng official has noted that it is listed as a private firm despite being owned by an SOE until recently, meaning state support is limited. As its eliminated capacity was linked to a capacity swap, it is also not eligible for all subsidies for worker resettlement. The project is now serving as an example of how subsidies can be inadequate to make up for the cost of eliminations.

Rongxin Iron and Steel Corporation is a private steelmaker in Hebei's Qian’an city. Local government asked it to shut down one 50-t convertor with 700,000 t/y steelmaking capacity before October this year. A senior Rongxin executive said that this would mean matching equipment, including one 450 cubic metre blast furnace, a sintering plant, shaft furnace, oxygen generator and power unit would also have to close. 800 workers will be discharged without any support. “We still don’t know how much subsidy we could receive from the government,” Rongxin adds.

Local government is also in a bind however. According to the Tangshan local Development and Reform Commission, Tangshan has budgeted CNY 300 million for capacity elimination subsidies for capacity removal and workforce resettlement this year. How this will be distributed is still being planned but it is unlikely to be enough to cover all costs.