revised emission caps for iron ore and steelmaking projects
likely will result in further consolidationand
closuresof small steelmaking facilities, analysts told
AMM sister publication Steel First.
The new standards, which also
apply to five other heavily polluting industries, came into
effect March 1 for new projects in 47 cities nationwide,
according to the Ministry of Environmental Protection. Existing
plants will be subject to restrictions beginning Jan. 1, 2015,
with a special focus on sintered iron and steel and pelletizing
While the finer details of the
caps have yet to be made public, industry analysts agree that
they are part of a wider effort to tackle chronic overcapacity
in Chinas steel industry. It is estimated that China has
at least 900 million tonnes of crude steel production capacity,
well above 2012 output of 716 million tonnes.
"These emission caps are a
further indication that the central government will step up
efforts to crack down on illegal projects and capacity," Frank
Tang, an analyst at investment bank North Square Blue Oak Ltd.,
Development and Reform Commission officially suspended new
steel project approvals in 2009, although Baosteel Group Corp.
and Wuhan Iron & Steel (Group) Corp. managed to secure
clearance for two new projects last year.
Local governments also widely
ignored the ruling and continued issuing new project approvals,
particularly on the back of the governments massive
post-financial-crisis stimulus package. The locally approved
projects, which have resulted in more than 350 million tonnes
of new, illegal steel capacity coming online, are now far less
likely to survive.
The new caps also are likely to
apply to steelmakers that relocate their operations away from
urban areas before 2015, Tang said, citing the widely
publicized decision by Baosteel to move some 12 million tonnes
of steelmaking capacity out of Shanghai.
Chinas large state-owned
steelmakers claim to have already installed the equipment
necessary to reduce emissions, including coke-dry quenching
technology to reduce carbon dioxide as well as dust extractors
and desulfurization processes.
However, there is some debate
over whether they actually operate the emission controls,
particularly when so many are struggling to turn a profit.
The countrys 80 largest
steelmakers reported that combined after-tax earnings fell more
than 98 percent last year to just 1.58 billion yuan ($254
million), although most of those companies are state-owned
companies that are deemed to be less competitive than their
A version of this article was first published by AMM sister
publication Steel First.