China struggles to rein in steel production

Pollution in Beijing has spread to around “very unhealthy” levels, with China’s environment minister surprising the country’s steel industry hub.

When Huang Runqiu arrived in the industrial city of Tangshan, about 150 kilometers east of the Chinese capital, he slammed four steel mills for what he thought were “fake” production records in order to hit emissions targets.

Indicated unusual intervention last month Increasing energy Following new commitments to reduce carbon emissions and greater efforts to impose one of its most polluted sectors, China’s Ministry of Environment

But the war on steel production control also reflects how the government’s response to the coronavirus epidemic has undermined plans to move its industry away from heavy industry and toward low-carbon intensive sources.

Like Many parts of the Chinese economy, Steel production has been heating up for more than 12 years as part of the rise of supply-side in the fight against primary injuries from this crisis. According to data from the International Energy Agency, this has contributed to an increase in the country’s carbon emissions compared to 2012 in other major economies.

“The coronavirus crisis has only made things clearer,” said Laurie Mellivitara, a research analyst at the Center for Energy and Clean Air.

“You have suffered a great deal in terms of your domestic use and service. . . And the government has responded with more construction stimuli. This is a real blow to their efforts to change the economic structure.

China’s environment ministry is working harder to curb carbon emissions through Getty Baker / AFP Getty

In 2020, Steel production in China Hit 1.1bn tons, up 6 percent, the highest level of all time, construction work was also raised. Production also increased in 2019, when the government further encouraged increased infrastructure spending.

In Tangshan, the city government in March ordered most mills to reduce production by 30 percent by the end of the year and told seven steelmakers to keep half the output at full capacity by July.

This month, it introduced rules for companies to rebuild or shut down older and more contaminated explosion reactors and set a June deadline for them to face degradation or fines. To underscore the message, the Environment Bureau fined 48 local companies in three days and paid Rmb1.92bn (মধ্যে 293 million).

Tangshan party chief Zhang Gujiang told steelmakers that meeting environmental targets is a matter of survival. State media reports said, “There will be no other way for organizations that do not fully address their environmental issues.”

One person working in the industry said that if a few people could predict the right direction of the policy, everyone was afraid of the next step.

Despite the fines and caution, reducing steel capacity can prove challenging, especially when older and inactive units are replaced with more efficient new technology.

“There has been a lot of investment in this sector and of course it has meant a lot more skill in coming online to much larger steel producers,” Millivarta said. “There are still problems with small controlled players just outside the power control system.”

Steel Works China

Tangshan Steel Mills Criticized for Forging Production Records Exceeding Exit Targets © Jiaolu Chu / Getty

It is difficult to control the supply of steel, and China faces a comparative challenge in terms of demand. Paul Bartholomew, a leading analyst in metals at S&P Global Plates, suggested that one of the reasons for the high steel production last year was the “huge credit crunch”, which the government is now reversing.

It has been fed into a construction frenzy, increasing demand for the metal and attracting more profits to producers.

“It’s a big challenge, because as soon as you start cutting production you’ll just see prices go up further,” he said. “It’s very difficult to get to the top when people make money in China.”

China’s steel benchmark price rose to ramp 5,550 per tonne last week, down from 5,000 rambu a month ago, posing a challenge to market forces to the government’s ambitions.

That tension is also playing in the property market. The government is trying Decrease incentives on its biggest property developers, And its measures – which include restrictions on lending to the sector as a whole – could reduce the demand for steel, one-third of which goes to real estate construction.

However, few are expecting a dramatic drop in demand. S&P Global Platts estimates that demand for steel in the real estate sector reached 322 million tonnes last year and expects demand to be between 313 million and 328 million tonnes this year.

Malivirta noted that many construction projects are financed by “centrally regulated” banks, which means that any solution to steel production needs to be coordinated into a larger financial system.

“As soon as the central government says we will not underwrite any more of all these constructions, and we are getting ready to accept it which means there is a slight slowdown in GDP growth,” he said. “Then that incentive to block controls … and try every strategy in the book to produce more steel just won’t be there.”

Additional reporting by Wang Jiukiao of Shanghai

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