As per the latest updates, the second round of environmental inspections of China’s Ministry of Ecology and Environment (MEE) has been officially started today. These inspections will cover 28 cities along with 11 cities in the surrounding area of Beijing-Tianjin-Hebei and will include the inspection of mines, industrial furnaces and small thermal power plants.
The intensified environmental checks will focus on the implementation of various pollution and dust control measures, straw burning and problem-oriented supervision and implementation of various tasks and measures.
Amid this inspection news, the steel prices in China skyrocketed today in a fear that in case of non-compliance during the inspections, steel units could be closed down resulting in the material shortage.
In Apr’18, a number of environmental pollution issues were reported in Jiangsu, Hunan, Anhui, and Hubei provinces. Enterprises in these provinces were found either with new environmental pollution issues or not well rectifying the problems discovered in the previous inspections following which MEE had announced its decision to initiate the second round of inspections soon.
In the first round of inspection many enterprises which failed to meet environmental standards have been ordered to suspend production or closed completely resulting which the supply of related products or raw materials tightened.
Environmental regulations have posed significant impacts on China’s domestic industry in 2017. China’s environmental policies always work well in regulating the market. Stringent administration helps cut out small-sized or even unlicensed producers and favours the development of leading enterprises.
Capacity cuts that have happened in China’s largest steel producing Hebei province
Hebei which is China’s largest steel producing province has pledged to eliminate 40 MnT of crude steel capacity during 2018-20, along with shedding of proportionate quantities of sintering and coking capacity.
In 2017, the province has shed 27.54 MnT per year of crude steel capacity and 21.32 MnT per year of pig iron capacity exceeding targets of 15.62 MnT and 16.24mn MnT respectively.
Tangshan which is a part of Hebei province has set a target to cut 12 MnT of crude steel capacity this year amid country’s annual capacity cut target of 30 MnT in 2018. Most of Tangshan’s capacity reduction this year will come from Fengnan district that has 10 steel mills with 26 MnT of production capacity. The district will shed 2.28 MnT of crude steel and pig iron capacity.
Steel producer Tangshan Guofeng will be among the main mills to shed capacity, with an aim of 1.56 MnT of pig iron and 2 MnT of crude steel capacity reduction. A demolition crew has already begun preparations for taking down three, 450m³ blast furnace and three basic oxygen furnaces at the mill.
Steel mills in Tangshan have been asked to shut 50% of production capacity over summer season starting from July 20 and these production restrictions are not likely to be lifted even after summer ends. Also, there is a buzz in the market that Tangshan is considering advancing its production cut plan to September 1, adding two more months to its scheduled restriction period starting mid-November.
According to the reports, the smog-blanked Tangshan city was identified as one of the most polluted cities among 169 regions monitored by the environmental ministry in July.
In case of other Chinese cities, although they may not have explicit production cut targets over the next two years, they are focusing on capacity replacement projects, typically from city centres to coastal areas that usually involve some shedding of capacity and strict supervision to weed out illegal and outdated capacity.
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