Core Viewpoint - The Ministry of Industry and Information Technology (MIIT) has released a draft for public consultation regarding the implementation of capacity replacement in the steel industry, aiming to optimize capacity and promote high-quality development in the sector [1][3]. Summary by Sections Purpose and Basis - The draft aims to implement the spirit of the 20th National Congress of the Communist Party and related policies to accelerate the reduction and quality improvement of existing steel production capacity, optimize structure, and promote market balance [3]. Scope of Application - The measures apply to all types of enterprises within China that are involved in the construction, reconstruction, expansion, or major repairs of iron and steel smelting equipment [3]. Definitions - "Equal replacement" refers to the construction capacity being equal to the capacity being exited, while "reduction replacement" indicates that the construction capacity is less than the exited capacity [3]. Capacity Replacement Ratio - The capacity replacement ratio for iron and steel production in all provinces must not be less than 1.5:1, with a lower ratio of 1.25:1 applicable to newly acquired compliant capacity post-June 1, 2021 [1][10]. Conditions for Equal Replacement - Equal replacement can be implemented under three conditions: internal major repairs without changing equipment type, special steel production using advanced processes, and projects in Qinghai and Tibet [1][10]. Encouragement of Green Practices - The draft encourages the efficient use of scrap steel, orderly development of electric furnace steel, and the adoption of green low-carbon technology in existing equipment [1][9]. Prohibited Capacity for Replacement - Six categories of capacity are prohibited from being used for replacement, including capacities listed for reduction tasks and those not actually constructed before the announcement of the replacement plan [4]. Cross-Regional Replacement - Enterprises are encouraged to implement cross-regional capacity replacement, with specific verification and public announcement requirements for capacity transfers [11]. Project Management and Verification - The draft outlines strict management and verification processes for capacity replacement projects, including public announcements and compliance checks by provincial departments [14][13]. Policy Transition - Existing capacity replacement plans announced before August 23, 2024, will continue to be executed under the original guidelines, ensuring policy continuity [15][16].