SHANGHAI Chinas steelmaking hub of Hebei province must cut 60 million tonnes of steel capacity by the end of 2017 to help control air pollution, the local government said Sept. 12.
The move follows plans unveiled by Chinas State Council the same day to improve air quality across the nation by slashing coal consumption, promoting clean energy usage and accelerating the closure of outdated capacity in selected industries.
The council aims to reduce the level of airborne particulate matter in the Beijing-Tianjin-Hebei region, Yangtze River Delta and Pearl River Delta by 25 percent, 20 percent and 15 percent, respectively, by 2017. New projects in these areas wont be allowed to set up their own coal-fired power plants, and unapproved projects from select oversubscribed industries will be banned.
In the first half of this year, seven of the 10 most polluted cities were located in Hebei, according to a Ministry of Environmental Protection report issued in August.
"We have heard a lot of talk about Hebei cutting steel capacity this year, but things sound very certain this time round," a Hebei-based mill source said. So far, however, there have been no further updates issued, he added.
With no detailed plan of action, players are unclear what effect the output cuts will have on the steel industry.
"Its hard to say whether prices will definitely go up as a result of the capacity reduction, but there is likely to be some support from both the higher environmental costs and tighter supply concerns," an analyst in Shanghai said.
Large-scale industry consolidation is also expected to occur in Hebei as a result of the emissions control measures, market players said.
Air pollution has become a big concern in China. Earlier this year, Beijing was shrouded in dense, debilitating smog for three days. The central government will be watching Hebei officials closely over the next few years to see how they tackle the reduction of emissions in their area, a Beijing analyst said.
A version of this article was first published in AMM sister publication Steel First.