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 Premier Li Keqiang told the annual session of the National
People's Congress, or parliament, on Thursday his government would
do everything it could to fight pollution.
China's vast and energy-intensive steel sector is at the heart of
the government's war on pollution, but it also encapsulates the
challenges of curbing smog without denting the economy. Complying
with stricter standards would have knock-on effects throughout
industry and raise costs for steel producers who are already feeling
the pinch of tepid demand.
Most steel producers in Linyi, a city in coastal Shandong province,
appear to have been shuttered, industry sources said.
"Almost all the steel-making production in Linyi has closed, and
there is no date for when to resume production," said an official
with Linyi Yuansheng Casting Co Ltd, one of the mills in the city,
who declined to be identified.
An official from another mill, Linyi Jiangxin Steel Co Ltd, said the
company has stopped production, without elaborating. Calls to other
mills in the city, including Linyi Steel and Shandong Shanwei Group,
as well as to the officials of the city and provincial government,
went unanswered.
 While steel production in Linyi is relatively small - about 7-8
million tonnes a year out of China's total annual capacity of up to
1.2 billion tonnes - the closures sent a message.
There was no official estimate on how much steel production was
affected by mill closures in Linyi, but the news sent Dalian iron
ore futures slumping some 4 percent amid fears the crackdown would
spread to other mills, potentially cutting demand for the
steel-making commodity. [IRONORE/]
"Beijing's battle against pollution will increase costs for steel
mills and force those uncompetitive ones to go bust eventually,"
said Cheng Xubao, an analyst with industry consultancy Custeel.
NICKEL PIG IRON
A new environmental law went into effect on Jan. 1, giving the
country more powers to punish lawbreaking officials. China also
appointed a UK-trained environmental scientist as the new
environment minister late last month, raising hopes for change.
Last week, inspectors from the Ministry of Environmental Protection
summoned mayors from the cities of Linyi and Chengde in the northern
province of Hebei, urging them to crack down on firms that have
violated environmental laws.
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Some nickel pig iron producers in Linyi faced permanent closures,
too, if they do not have funding to upgrade facilities to meet
China's tougher environmental standards after local authorities
ordered them to halt production this week, industry sources said.
Nine nickel pig iron plants were among some 50 factories in the
prefecture-level city to close this week, local media reported.
China is the world's top producer of nickel pig iron (NPI), a
cheaper alternative to refined nickel and ferro-nickel. Shandong is
a leading producer of NPI in China and many plants are located
around Linyi.
"This could be a consolidation if some plants do not have the
funding to do upgrading," said a trading manager at Shengyang Group,
which operates one of the nine closed nickel pig iron production
plants.
An executive at another closed nickel pig iron producer, Linyi
Jinhaihui Technology Co Ltd, said the firm did not know when it
could resume production although it believed that the plant meets
environmental standards.
"All industrial firms have stopped production, no matter they meet
the standards or not. The authorities have not said clearly what we
should do," the executive said.
(Additional reporting by David Stanway and Shanghai Newsroom;
Writing by John Ruwitch; Editing by Robert Birsel and Ian Geoghegan)
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