Impact of Beijing Olympics on Chinese mills

In order to deliver their promise of a ‘Green Olympics', Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia, and Shandong have jointly formulated measures to guarantee Beijing's air quality during the 29th Olympic Games. For this reason, relevant industries such as the steel industry, power industry, coking industry etc. are being obliged to take action. Some mills in Beijing, Tianjin and in Hebei have started or will soon start to reduce or stop their production.

According to the statistics, the combined 2007 crude steel output in Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia and Shandong totaled 210.69 million mt, covering 43.1 percent of the country's gross output. Broken down into the various regions, in 2007 Hebei Province registered a huge 21.9 percent of the country's total output, hitting 107.1 million mt - a figure which accounted for 70 percent of the total output of the combined regions mentioned above. Hebei was followed next by Shandong Province and Shanxi Province.

According to officials from China's National Bureau of Environmental Protection, the six cities and provinces in question have registered smooth progress in executing the relevant environmental measures. Beijing, Tianjin, and Hebei have eliminated a number of cement plants, coke producers and small-scale mills, with over 70 percent of targeted elimination work already achieved. Meanwhile, various local bureaus of environmental protection have also declared that enterprises that fail to meet the state's requirements within a certain period of time will be forced to halt production during the period of the Olympics.

According to the current implementations and projects, the crude steel output of the six cities and provinces will decrease by 9.58 million mt, accounting for 4.55 percent of total output in 2007, and 4.6 percent of that in 2008 according to projections based on the first two months of 2008. In addition, iron-making capacity will be reduced by 5.77 million mt, accounting for 2.6 percent of the total output of pig iron in 2007, and 2.7 percent of the total projected output for 2008.

Generally speaking, influenced by production cuts and stoppages, the crude steel output of the six cities and provinces will register a drop in growth to some extent; however, due to many other uncertain factors, the exact decrease rate remains to be seen. Nevertheless, most large and medium enterprises except Shougang Group will not be affected significantly.

It must be pointed out that the Chinese steel enterprises using out-of-date technology are to be eliminated in the interests of energy savings and pollution reduction, and also on account of the rising raw material prices and the consolidation trend in the steel industry. Therefore, the implementation of the relevant measures will not only ensure that air quality reaches the  desired standards during the period of the Beijing Olympic Games, thereby fulfilling the Chinese government's solemn promise made during its Olympic Games application, but will also hasten the elimination of dated capacities and improve the structure of China's steel industry.

Table: 2008 January-February crude steel outputs of the six cities and provinces