Environmental costs weigh on China’s steelmakers

Chinese steelmakers, already obsessed with low profit margins, have been told to increase their environmental investment to help the country reduce air pollution. As part of an action plan to curb air pollution, the Chinese government is considering expanding a ‘green credit’ policy that orders banks to lend no more to companies considered energy-inefficient and polluting.

According to the plan unveiled earlier in September, China vowed to take a multipronged approach to tackle air pollution, including cutting the share of coal in its primary energy production to below 65% by 2017 from above 70% now. The supply of natural gas, coal-based substitute natural gas (SNG) and coal bed methane will also be increased. New coal-fired power plants will be banned for new projects to be constructed in the Beijing-Tianjin-Hebei region, the Yangtze Delta and the Pearl River Delta regions, according to the plan.

Already among the most targeted high-polluting and energy-intensive industries, the steel sector is required to adopt new technology, upgrade equipment and eliminate outdated production methods.

For Hebei Province, where steel plants produced 103.35Mt of crude steel in the first half of this year, accounting for 26.5% of China’s total crude steel output, the environmental pressure is imminent. About 60% of steel companies in Hebei, including state-owned enterprises, were found to be causing extensive air pollution, according to the Ministry of Environmental Protection in May. This northern China province near Beijing was partly blamed by some scientists for the suffocating smog in the country’s capital earlier this year.

Under the environmental pressure, authorities in Hebei have set the goal of cutting 60Mt of steel output within five years, but steelmakers argued it would be hard to respond to the government’s pollution-reduction call as their profit level was trivial compared to other industrial sectors, averaging just 0.34% in the Jan-August period for medium and large steel producers.

Source: China Metals e-mail chinametal@xinhua.org