Steel mills on the move
New measures in the war on pollution are testing the steel industry’s mettle, say Reuters’ Muyu Xu and Thomas Peter in Tangshan.
AS China extends its war on urban pollution and excess capacity in heavy industry, steel mills are being forced to move or close down. But relocation is hugely expensive and environmentalists say it shifts the problem to areas where environmental oversight is weaker.
‘‘PUSH the steel mills out of the city centre and turn it into a modern, habitable place to live in,’’ reads a banner hung across the boardedup offices of Guofeng Iron and Steel Co in the centre of Tangshan, China’s top steelmaking city.
Behind the gates of the factory, surrounded by a hospital, a shopping mall and highrise apartment blocks, workers and bulldozers have been tearing down furnaces as part of a 38 billion yuan ($NZ8.39 billion) plan to move to a new industrial park 60km away.
Six hours’ drive away to the southwest, meanwhile, executives at Hebei Xinjin Iron & Steel Co, a Handanbased mediumsize mill, are scrambling to find a new site in the south after being served notice to leave their home province last month.
The two steelmakers are among the first producers in Hebei province to comply with the local government’s plan to make its smokestack industries more efficient and clean the toxic air of the northern industrial heartland.
Provincial authorities have ordered mills in almost a dozen of its smoggiest cities to shut, move to a new industrial park on the coast or get out.
The moves mark a new front in the Government’s war on pollution and excess capacity in heavy industry, heralding even more upheaval for the debtladen steel sector.
‘‘Mills in Handan are now scrambling to look for a new place to move,’’ Yuan Zhanpeng, a manager at Xinjin, told Reuters.
Xinjin had had talks with some governments in eastern Anhui and southern Guangxi provinces but no decision had been made, he said.
Anywhere but here
Tangshan missed its air quality goals last year, while producing more steel than the whole of the United States.
Hebei’s aim is to cut steel capacity to 200 million tonnes per year by 2020, down 20% from 2017. Jiangsu, China’s secondlargest steelmaking region, issued a similar plan in August.
But the strategy will come at a huge financial cost to the mills, and environmental experts have questioned whether moving them to the coast will simply shift the problem south.
‘‘It could be a problem because environmental management and regulatory oversight in the south are weaker than in the north,’’ said Ma Jun, director at the nonprofit Institute of Public & Environmental Affairs.
‘‘What I am concerned about is that the moves will not necessarily improve air quality in Hebei, since the remaining mills might ramp up output to fill the market gap.’’
The Ministry of Ecology and Environment (MEE) would strengthen oversight of local authorities to try to prevent pollution moving south, said
Cui Shuhong, director of the MEE’s environmental impact assessment department.
Move or die
In its plan, Hebei has told six mills to absorb capacity from 17 smaller rivals and move by 2020 to four industrial parks dedicated to steelmaking in Fengnan, Caofeidian, Canzhou and Jingtang on Bohai Bay, southeast of Beijing.
Guofeng is one of the companies being swallowed up by a larger competitor, Xinhua Metallurgy, along with four other operators.
That deal is seen as a test case for Hebei’s ambitious experiment, ousting inefficient minnows and creating megamills to compete globally.
At Fengnan, the newly created company is building a stateoftheart mill covering an area more than twice as large as New York’s Central Park that will produce 7.9 million tonnes per year of precision steel. That is much lower than the combined 9.9 million tonnes produced by the companies now.
Construction started last year and the first phase is expected to finish next month.
Underscoring the significance of the project for Hebei, a sign strung across a new building on the site reads: ‘‘No delay and no rest’’.
‘‘Big steelmakers will have a bigger voice when they negotiate with foreign miners on iron ore imports. That’s also what the Government wants to see,’’ said Richard Lu, steel analyst at consultancy CRU in Beijing.
By 2020, China’s top 10 steelmakers will account for 60% of national capacity, up from a third at present, while Hebei aims to cut its portion of nationwide steel output to 20% from nearly 30%.
The Xinhua project is partly funded by central and local government, but those forced to move will have to find financing, stirring concerns the industry may load up on more loans. The sector’s debt ratio is 67.3%, down from 70% last year as mills benefited from soaring metal prices, but is still higher than the 56.6% average for China’s general industrial companies.
Guofeng and its partner companies declined to comment.
Town of steel
Tangshan is steeped in steel. Hundreds of small private producers who took advantage of vast local iron ore and coal deposits have been shuttered in recent years by the Government’s push to clean the air and cut excess capacity.
But removing mills entirely will transform the cityscape and lives of citizens, who have watched it rebuilt since a devastating earthquake in 1976.
‘‘All steel mills in this region will be shut. When that day comes, I will shut my business and move to somewhere else as well,’’ said a resident, who has run a small restaurant near Guofeng’s factory for 14 years. She declined to give her name.
Officials pledged to invest more than 100 billion yuan this year to upgrade the city’s economy.
But companies are struggling to find regions that will accept them, due to environmental pressures. Southern
Guangdong province has banned new industrial capacity in the Pearl River Delta region to limit pollution.
Still, many saw the writing on the wall. The biggest steel mill in provincial capital Shijiazhuang, Hebei Jingye Steel Group, started looking for a new home before the plan came out.
‘‘Even though our mill is far from the city centre and has adopted sophisticated environmental equipment, we thought . . . we would have to move,’’ Zhang Lijie, a manager at the firm, said.