China's steel sector braces for Winter Olympics impact

Steel mills and mining enterprises in northern China have yet to experience any major disruptions to production and transportation of their commodities ahead of the upcoming Winter Olympic Games being staged in and around Beijing over February 4-20. But mill and mine representatives canvassed by Mysteel Global on Wednesday anticipated that local and central government authorities will take measures to ensure that the events are held under clear skies and are not overshadowed by incidents.

At a press conference in Beijing on January 24, Liu Youbin, spokesman for China's Ministry of Ecology and Environment, stated that during the holding of the Winter Olympics, local governments could "take necessary administrative measures and impose temporary restrictions on enterprises whose airborne emissions and atmospheric pollution levels are high, but which have limited impact on the economy".

In China, it has been a common practice that whenever major political, sporting or special events are scheduled, industrial activities in the regions hosting the events including steel production are curtailed to ensure clean air for participants and spectators. Mining activities are also scrutinized to limit the risk of accidents that might mar the festivities, Mysteel Global notes.

The Winter Olympics will be held over February 4-20 in Beijing, in nearby Yanqing, and in Zhangjiakou in North China's Hebei province, to be followed over March 4-13 by the Winter Paralympic Games in the same cities. Liu acknowledged that the Olympic competitions will convene during periods "when winter turns to spring (where normally) the weather conditions will be very unfavorable" so far as air quality is concerned.

In recent weeks, rumors have been circulating in the domestic market that steel production in Hebei and Shanxi provinces, as well as in East China's Shandong and Central China's Henan province (both surrounding Hebei), has already been further restricted due to the upcoming Winter Olympics. However, representatives of mills in these areas surveyed by Mysteel Global on Wednesday claimed their production remains stable.

"We have yet to receive any official notice from the local government about production curbs for the Games period," an official with a steelmaker based in Hebei's Shijiazhuang city, said.

But, according to him, the mill has been operating at around half of its capacity starting in November anyway, as part of normal 'winter heating season' restrictions.

Officials with other two steel producers in Shanxi also told Mysteel Global that "their production is normal" and had yet to hear of any curbs relating to the Olympic Games.

An iron ore trader who supplies raw materials to mills in Shandong also observed that for now, restrictions on Shandong steel mills are "nothing serious".

In fact, as with the Shijiangzhuang mill, steel producers in many cities in the four provinces mentioned have already been observing restrictions for smog abatement during the 'heating season' running from November to end-March. Mills in areas regarded as environmentally-sensitive are required to lower their production by 30% over January-March, as Mysteel Global reported.

Still, domestic market sources believe further restrictions will come into force as the start of the Games comes closer, especially if the air quality deteriorates. Already in Tangshan, the country's top steel producing city in Hebei, effective from January 23 local steelmakers were asked to restrict the operation of sintering machines and blast furnaces, as well as the use of diesel trucks for transporting raw materials and finished steel, in order to combat the sudden blanketing of heavy air pollution.

"If there will be more restrictions (for the Olympic Games) - which I am sure there will be - they are unlikely to be communicated in a written document citing the Games," a Beijing-based steel analyst commented. "More likely, the instructions will be delivered orally or, as in case of Tangshan, coached in terms of measures to fight against poor air quality," he said.

And just like the Tangshan steelmakers, mining enterprises nationwide - particularly those in northern China - are already expecting to be impacted by the impending sports event but the measure has been frontloaded into Chinese New Year (CNY) preparations.

Beginning around January 31, the official start of this year's CNY celebrations, mining enterprises including coal and iron ore miners will be unable to use explosives in mining activities and local governments will suspend the sale and distribution of explosives to them, Mysteel Global understands. This too is a usual practice in China when major national or international events and summits are about to be held, and is aimed at limiting the risk of accidents or similar calamity that might darken the national mood and distract public attention away from the events.

"Due to the Winter Olympic Games, the suspension period of explosive supply is expected to be extended beyond the end of the Chinese New Year holidays into at least mid-February," an official with a Hebei-based iron ore miner remarked. This year's CNY holiday officially spans January 31 until February 6 but as the holiday overlaps with the Winter Olympics, the temporary suspension regarding explosives will be extended.

Written by Olivia Zhang, zhangwd@mysteel.com and Victoria Zou, zyongjia@mysteel.com

This article has been published under an exchange agreement between MySteel Global and SteelMint.