China maintains strict environmental stance on heavy industry pollution

 

Tuesday, May 15th, 2018

In brief: China called for reducing 150 million tonnes of steel production capacity by 2020. As the country's environmental watchdog is getting stronger, a series of environmental inspections a number of mineral supply chains including bauxite and alumina, graphite, and magnesia is undergone. 

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China aims to meet its target for reducing steel production capacity two years earlier than planned, the industry ministry said in a statement on Wednesday, as the world’s top steel producer ramps up its years-long push to reduce excess output.

The original plan called for reducing 150 million tonnes of steel production capacity by 2020.

However, China will face more pressure in tackling overcapacity as strong prices reduced steelmakers’ willingness to cut capacity, the Ministry of Industry and Information Technology said.

China will begin carrying out checks in the first half of this year on closed induction furnaces to prevent them from resuming production, the ministry said.Last month, the country issued stricter rules for building new steel production capacity to replace obsolete facilities. The move underscored China’s determination to curb growth in its massive steel sector.

The surplus to be shut this year isn’t hard, but the main task is consolidating the results and prevent closed mills from resuming production. Also there is concern that the tough capacity swap rules may not be implemented strictly,” said Kevin Bai, an analyst with CRU in Beijing.

China’s environmental crackdown, the supply-side reform and the closure of lower-end induction furnaces have pushed steel rebar prices up by about 38 percent in the past year. But, the improving market conditions had lured some closed mills to resume production.

China shut down 115 million tonnes of steel capacity between 2016 and 2017, and closed 140 million tonnes of induction furnaces that use scrap metal to make steel.

In 2017, China produced a record volume of steel at 832 million tonnes.

China will encourage companies to build more electric furnaces to process scrap and urge companies to move production out of sensitive regions, including northern Beijing, Tianjin and Hebei province, it added.

China maintains strict environmental stance on heavy industry pollution

The Chinese government has continued to launch a series of environmental inspections on heavy industries in the country in order to strengthen its control over industrial pollution levels and environmental quality.

The wide-reaching government action related to the implementation and tightening of the environmental policy had serious consequences for a number of mineral supply chains in the country, including bauxite and alumina, graphite, and magnesia.

What follows is a breakdown of how these mineral commodities have been affected to date.

Bauxite, alumina

Bauxite mining in Shanxi, China’s principal producing province of the refractory-grade mineral, has been targeted by government authorities on and off since 2016. The first wave of clampdowns, which very much resembles the situation today, had the double aim of reducing widespread illegal mining of the mineral, as well as improving the sustainability profile of bauxite mining and processing, reducing pollution affecting the local air and water.

From mid-November 2017 to mid-March 2018, a temporary shutdown was put in place in Shanxi and Henan, the latter being the main province for production of fused alumina. During the four-month period, industrial production of bauxite and alumina was severely reduced, a pattern that kept stocks low and upheld prices.

Then, at the end of March, fresh regulations from the national government set out a three-month plan for proper management of local land and resources, tackling unlicensed exploration and illegal exploitation and mining of bauxite.

Shortly after, in the week of April 16, bauxite calcination plants in Shanxi were ordered to halt all operations once again, pending new inspections. Sources said that this closure may last as long as two months, until the end of June.

Magnesia

The market for magnesite and processed magnesia products experienced a severe squeeze in Chinese output last year, which led prices to spiral upward in the second half of 2017 and to remain firm into 2018.

Mining restrictions remained in place into this year, with dynamite blasting banned and miners allowed only to extract via pneumatic drilling or by hand. This had already affected the availability of magnesite ore for the production of high-grade magnesia, leading to a shortage of high-grade dead-burned magnesia (DBM) and fused magnesia (FM), which is continuing.

In mid-April, a sudden government order brought to a halt all magnesite mining in Liaoning – the largest producing area for magnesia. Several producers in contact with Industrial Minerals confirmed that they had stopped mining, and did not know how long the stoppage would last.

"All magnesia companies have been forced to stop magnesite mining from April 12, following government requirements," a local producer said.

Market prices have so far been unchanged in the weeks since the mine closure, but market participants remain on alert, after witnessing the sharp increase in prices last year.

Graphite

In line with the restrictions imposed on other mineral supply chains, graphite was also widely affected by the environmental policy-related series of inspections and closures last year, especially in Shandong, the main producing province of the mineral.

This led to a rapid appreciation on the spot market for flake graphite in the second half of 2017, following a number of years of weak pricing. The high price levels have since stabilized in early 2018 and have mostly held steady to date.

Local producers are, however, concerned about a fresh round of production cuts in anticipation of a government summit to be held in Qingdao in June. As seen on several previous occasions, authorities impose a temporary stop to heavy industrial operations in the weeks running up to an event, to improve local pollution levels. Sources expect that they will do the same in this instance.

Sources:

1-www.reuters.com

2-www.indmin.com

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