Posted on 05 Mar 2015
Local authorities in China
have closed a number of steel mills after they failed to meet
environmental standards, industry sources said on Thursday, as
the central government toughens its fight against pollution. Premier Li Keqiang told the opening session of the National
People's Congress on Thursday his government would do everything
it could to fight pollution, which has become a lightning rod
for public discontent. There was no official estimate on how much production was
affected by the mill closures in the eastern province of
Shandong but the news sent Dalian iron ore futures
slumping 4 percent amid fears the crackdown would spread to
other mills, potentially cutting demand for the steel-making
commodity. China's vast steel sector is at the centre of the
government's war on pollution. But complying with stricter
standards would raise production costs and producers are
similarly hit by tepid demand. Inspectors from the Ministry of Environmental Protection
last week summoned mayors from the cities of Linyi, and Chengde
in the northern province of Hebei, urging them to crack down on
firms that have violated environmental laws. "Almost all the steel-making production in Linyi has closed,
and there is no date for when to resume production," said an
official with Linyi Yuansheng Casting Co Ltd, one of the mills
in the city, who declined to be identified. An official from another mill, Linyi Jiangxin Steel Co Ltd,
said the company has stopped production, without elaborating. Calls to other mills in the city including Linyi Steel and
Shandong Shanwei Group as well as to the officials of the city
and provincial government went all unanswered. Analysts estimate the annual crude steel capacity in Linyi
at about 7-8 million tonnes. China's total annual steel capacity
is between 1.1 billion and 1.2 billion tonnes. "Beijing's battle against pollution will increase costs for
steel mills and force those uncompetitive ones to go bust
eventually," said Cheng Xubao, an analyst with industry
consultancy Custeel. The government is determined to tackle hazardous smog by
launching a new environment law, imposing higher environmental
standards and strengthening monitoring. Some steel mills were
closed permanently last year. Chinese steel mills, already suffering from persistently low
prices as a result of overcapacity and an economic slowdown, are
now paying an estimated 160 yuan ($26) per tonne of steel to
comply with stricter environmental guidelines.
