Reforming the bloated steel sector in northern China’s Hebei Province is a key part of Beijing’s efforts to cut air pollution, but it is the market — not the government — that is doing most of the work.
That undermines state media claims that the Chinese government is going the extra mile to clean up Hebei, the country’s biggest steel producer and home to seven of its 10 most polluted cities, environmentalists and industry experts say.
Stirred by growing public anger over smog that often spreads to neighboring Beijing, the central government summoned Hebei’s leaders to a series of meetings in the capital last year during which it urged them to draw up plans to slash steel capacity. They eventually agreed on a target of 86 million tonnes, or about 35 percent of current capacity, by 2020.
With heavy smog again engulfing much of northern China since last week, Beijing has sent inspection teams to Hebei and elsewhere to see how authorities are responding, and the steel sector is high on their list of targets.
Yet many mills are already near bankruptcy because of slowing demand, plunging steel prices and a liquidity crisis that would have forced them to shut anyway, experts say.
“They are only closing steel mills that are already dead,” said Xu Zhongbo (許中波), chief executive of Beijing Metal Consulting Ltd (北京梅塔科咨詢公司) and a veteran industry adviser who works with steel firms in Hebei.
On the outskirts of Tangshan — a city of 7 million people that makes more steel per year than the whole of the US — the hulking cranes and chimneys at the Tanghsan Qingquan Steel Group (唐山市清泉鋼鐵集團) mill are frozen in inactivity. After not being paid for six months, the mill’s workers went on strike in October last year and have not returned since.
Qingquan Steel is one of dozens of so-called “zombie mills” in Tangshan, where authorities have been ordered by the Hebei Provincial Government to draw up a list of plants to close so output can be cut by 10.8 million tonnes this year.
“In Tangshan and other parts of Hebei, the private mills are facing the most difficult time in their history,” Xu said. “Profits are poor and producers are all losing money — this has nothing to do with environmental measures: It is the economy.”
Tangshan’s steel sector has long been dominated by hundreds of small private producers taking advantage of vast local iron ore and coal deposits, as well as a building boom spurred by an earthquake that flattened most of the city in 1976.
Although Hebei once accounted for about one-quarter of China’s steel output, production fell to less than 20 percent in the final two months of last year.
Huang Wei (黃維), a campaigner with environmental group Greenpeace in Beijing who has studied the impact of Hebei’s industries on air quality, said that targeting steel mills was the easy option, given the difficulties already facing the sector as China’s economy grows at a more moderate pace.
The bigger challenge was easing Hebei’s dependence on coal, she said.
“Whether this target is too soft or not will depend on whether the reduction is an outcome of the market or purely a political task,” Huang said. “[The central government] will face an even tougher situation after it has picked low-hanging fruit like the steel industry.”
Officials from Hebei and Tangshan declined requests to be interviewed, while the Chinese Ministry of Environmental Protection in Beijing also did not respond to requests for comment.