Oil Report

EXCLUSIVE-China mulls radical steps targeting metals, coal in war on smog -document

BEIJING, Feb 13 (Reuters) - China is considering forcing steel and aluminium producers to cut more output, banning coal in one of the country’s top ports and shutting some fertiliser and drug plants as Beijing intensifies its war on smog, a draft policy document shows.

The Ministry of Environmental Protection (MEP) has proposed the measures in a draft policy document seen by Reuters. If implemented, they would be some of the most radical steps so far to tackle air quality in the country’s most polluted cities.

The move comes after China’s northeast has battled some of the worst pollution in years as emissions from heavy industry, coal burning in winter and increased transport have left major cities including Beijing blanketed in thick smog.

The document outlines plans to cut steel and fertiliser capacity by at least half and aluminium capacity by at least 30 percent in 28 cities across five regions during the winter heating season, which normally lasts from late November to late February.

By July, it would stop Tianjin, one of the nation’s busiest ports, handling coal, with shipments diverted to Tangshan, 130 kms (80 miles) to the north. Last year, the port accounted for 17 percent of China’s coal imports.

By September, ports in Hebei province would not be allowed to use trucks to carry coal from railways to ships.

A source with direct knowledge of the proposal said the environmental watchdog has distributed the draft to seek opinion from relevant local governments and companies.

The Ministry declined to comment on the draft. The Ministry of Transportation did not respond to requests for comment.

It’s not known when the Ministry expects to decide on whether to implement the plan, one of the most extreme since the government launched its offensive on pollution three years ago.

If introduced, the steps would likely add further fuel to rallies in aluminium, steel and coal prices, which have been buoyed by China’s efforts to shut excess capacity and clean up polluting sectors.

Still, prolonged cuts in capacity will reignite worries about demand for raw materials like iron ore.

They will also cause major upheaval for utilities, miners and traders, as they seek alternative routes for their coal.

The five regions affected are Beijing, the port city of Tianjin and the neighbouring province of Hebei, as well as Shandong, Shanxi and Henan.

Located along China’s east coast, they are some of the top steel and coal producing regions, as well as among the most populated and most plagued by smog.

The Ministry also plans to close pesticide and pharmaceutical factories and fertiliser plants that use urea unless the chemicals and drugs are critically needed for the population, according to the document.

The news comes as the country’s northern regions braces for more heavy smog this week. On Monday, state media reported Chinese cities that sit on three pollution “highways” have been told to coordinate efforts to reduce emissions.

Reporting by Meng Meng and Josephine Mason; Editing by Richard Pullin