China to implement 3-y work plan to fight air pollution

A three-year work plan to fight atmospheric pollution unveiled by China's State Council in a meeting Wednesday could have wide-ranging implications for the country's steel industry in the tougher measures promised to prevent the installation of new capacity in existing steel-producing and steel-consuming regions.

A three-year work plan to fight atmospheric pollution unveiled by China’s State Council in a meeting Wednesday could have wide-ranging implications for the country’s steel industry in the tougher measures promised to prevent the installation of new capacity in existing steel-producing and steel-consuming regions.

Named the ‘Blue Sky Safeguard’ Plan and included as a core component in China’s 13th five-year development plan spaning 2016-2020, it identifies several industries as major contributors to the toxic smog frequently enveloping major Chinese urban centres and regions. By more tightly regulating the industries seen as the major culprits, the plan aims to steadily improve air quality and reduce the number of days per year heavy pollution causes disruptions and discomfort to citizens, a State Council post later that day showed.

China’s Minister of Ecology and Environment, Li Ganjie, said in the meeting that the work plan will be structured around four “keys”, with the key target being to reduce atmospheric particulate matter (PM2.5), recognised as a public health risk over long-term exposure. Among the key sectors targeted are steelmaking, thermal power generation, construction materials, primary aluminium smelting, coke making and diesel truck transportation. The key areas where efforts will be concentrated will be Beijing-Tianjin-Hebei region and neighbouring areas, the Yangtze River Delta and the Fenwei plains (in North China’s Shanxi province and Northwest China’s Shaanxi province); and the key time period will cover autumn, winter and early spring, Li also pointed out.

When the plan would be formally launched was not mentioned but indications are it started on June 11 when the ecology and environment announced it had begun a ten-month ‘Blue Skies Safeguard’ pollution control inspections blitz to last until April next year, as Mysteel reported. The MEE said it was despatching over 290 inspection teams nationwide, each comprising several members, to identify sources of pollution and suggest remedies.

In Wednesday’s State Council meeting, delegates were told that adding new capacity in the steel, coke and electrolytic aluminum sectors is strictly forbidden in the above-mentioned key areas and that the threshold for the size and capacity of equipment to be phased out will be raised. A flavour of this has already been given under the central government’s newly-released ‘ultra-low emissions’ scheme which advocated that blast furnaces below 1,000 cu metres are now to be scrapped where as previously, only those below 450 cu m were required to be eliminated.

“I believe this (plan) will significantly change the landscape of China’s steel industry,” a senior Beijing-based steel analyst commented. “New capacity will not be allowed to be built in these regions – even under ‘capacity swap’ arrangements – so new investment will have to be diverted to other regions.” Capacity swap refers to the rule whereby a steelmaker is only allowed to install new capacity if old capacity of at least the same (or preferably larger capacity) is stopped and scrapped, Mysteel notes.

Similar rules regarding the installation of new capacity have already been applied in the Beijing-Tianjin-Hebei region and neighbouring areas, but now the scope has been expanded to other areas, including the economically-developed Yangtze River Delta where steel demand is very strong, according to the Beijing analyst.

The steel industry is highly energy-intensive and emissions-heavy so pollution control is always crucial, a senior Shanghai-based analyst remarked. “With the implementation of the plan, the curbs on steel production are expected to be broader and last longer, so therefore, the impact on steel supply will be greater. As a result, from a business perspective China’s steel industry will enjoy longer boom periods,” he asserted.

China’s steelmakers and steel consumers are already getting a foretaste of what the ‘safeguard’ plan might mean for steel markets. This month, other central government-backed inspection teams are fanning out across China specifically looking at pollution control equipment installed at enterprises including manufacturers, quarries, logistics firms and anywhere considered a source of pollution. Though this blitz is being conducted entirely separate from the Blue Skies plan, steel producers are responding to slowing or stopping production for the duration of the visits, as Mysteel has reported.

This is now happening when Blue Skies investigators arrive, Mysteel has learned. On Wednesday, for example, market sources disclosed that steel mills in Changzhou city in East China’s Jiangsu province where one Safeguard inspection group visited had further scaled down production – even though their output was already reduced under a previous production curb imposed on them by the local city government.

Intensive environmental checks and the attendant concerns about shrinking steel supply have sent domestic steel prices soaring, an unusual phenomenon when spring and summer prices are normally soft due to seasonally weak demand. As of June 14, Mysteel’s HRB 400 20mm dia rebar benchmark price had jumped for three consecutive days to reach Yuan 4,235/tonne ($662.8/t), up by Yuan 69/t from June 11 (the day when the inspection campaign was announced) and by an astounding Yuan 495/t on year.

Written by Olivia Zhang, zhangwd@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com