China to Close Steel Mills Failing Environment Limits

By Bloomberg News

Dec. 9 (Bloomberg) -- China, the world’s largest emitter of greenhouse gases, set new environmental and power standards for steelmakers and threatened closures to curb pollution and overcapacity.

Plants should cap effluent discharge at 2 cubic meters and sulfur dioxide emission at 1.8 kilograms for every ton of steel made, according to draft regulations the industry ministry made available for public comment on its Web site.

China, the world’s largest steelmaking nation, has rejected almost $29 billion of industrial projects this year and is planning measures to close plants to curb pollution, it said last month. A steel oversupply is overwhelming demand created by the government’s stimulus, and depressing profits for larger mills including Baoshan Iron & Steel Co.

“These environmental and power standards are all necessary for the long-term development of China’s steel industry,” said Hu Yanping, analyst at industry publication Umetal. “But the key is how to implement the policies. After all there are various parties involved with different profit interests.”

Baoshan Iron & Steel, the largest Chinese steelmaker, rose 0.7 percent to close at 9.24 yuan in Shanghai trading. The benchmark Shanghai index dropped 1.7 percent.

“Steel mills must exit the industry if they can’t meet the requirements,” the Ministry of Industry and Information Technology said in the proposal. Government departments shouldn’t approve construction and upgrading if the mills can’t meet the requirements and shouldn’t issue effluent discharge and land permits, the draft also said.

Copenhagen Summit

China is proposing the standards as Copenhagen this week hosts the United Nations climate summit, where delegates from almost 200 countries are discussing how to extend or replace the 1997 Kyoto Protocol. The Asian nation last month pledged to cut output of carbon dioxide gas per unit of gross domestic product by 40 percent to 45 percent by 2020 from 2005 levels.

Banks shouldn’t give credit support and government departments must not issue iron ore import permits and supply the steelmaking ingredient to mills failing to meet the new requirements, the Chinese ministry said today in the proposal.

Steel plants should cap energy consumption of blast furnaces at 411 kilograms coal equivalent and fresh water use at 6 tons for each ton they produce, the statement said.

The ministry also proposed that carbon steel mills should have a minimum production capacity of 1 million tons, and specialized makers of at least 500,000 tons. It didn’t suggest penalties for those failing to meet output limits.

Small Plants

“The draft has more details on power and environmental standards compared with the industry policy announced in 2005,” said Xu Xiangchun, chief analyst at researcher Mysteel Research Institute. China has between 300 to 400 carbon steel mills with individual capacity of less than 1 million tons, he said.

The government last month also issued environmental standards for lead smelting, capping sulfur dioxide emissions at a maximum of 8 kilograms for each ton of lead produced.

Crude steel production in China may rise 14 percent to 570 million tons this year, Xu Lejiang, chairman of Baosteel Group Corp., the parent of Baoshan Steel, said Dec. 3. The nation’s output capacity may have reached 700 millions or higher, the National Development and Reform Commission, the country’s top economic planner, said last week.

China is planning measures to close plants in steel, aluminum, cement, coke, paper, glass and utility industries, the Ministry of Environmental Production said Nov. 13. The NDRC is seeking to address the slow pace of consolidation in industries with overcapacity, it said Nov. 27.

--Xiao Yu. Editors: Tan Hwee Ann, Ravil Shirodkar.

To contact the Bloomberg News Staff of this story: Xiao Yu in Beijing at yxiao@bloomberg.net