New rules may ease pollution but won’t solve PRC steel overcapacity

New rules aimed at making China’s sprawling steel sector greener will do little to tackle rampant overcapacity or help Beijing protect its big state-owned mills from smaller, nimbler rivals. China’s environment ministry has said it will impose “special emissions restrictions” from next month on major industries from steel and petrochemicals to cement, non-ferrous metals and coal-fired power. Environmental inspections have already started in big steel producing regions.

But when it comes to steel, it’s more than just pollution. Many in the industry hope the curbs will help tackle overproduction, slash the number of privately-owned mills and boost the market share of state-owned giants such as Baoshan Iron and Steel (“Baosteel”), Wuhan Iron and Steel and Angang Steel.

"If we are to solve the emissions problem more effectively, reducing capacity is a part of it,” said Mr. He Wenbo, Baosteel’s chairman, on the sidelines of China’s parliament session last month. “We approve of any effort to strengthen the laws, and no enterprise in the steel sector that has reached a certain standard will oppose it,” he said, noting the implementation of environmental standards would help create a level playing field.

Mr. Wang Yifang, head of China’s biggest steel firm, the Hebei Iron and Steel Group, also said China needs to use environmental controls to rein in overcapacity. Big mills have seen their profits eaten into by smaller rivals, and the government has sought to boost the giants’ competitive position by raising industry standards and thresholds. It wants its top 10 mills to control 60% of total capacity by 2015, up from around half now, and is likely to use "administrative measures” like pollution and resource-use standards to meet that goal.

- Reuters News

 

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