Recent media reports indicate that China stands firm in its long-term commitment to improve air quality as authorities are reportedly finalizing the new three-year plan (2018-2020) to curb air pollution, mainly due to emissions caused by vehicles and productions of heavy industries. The plan will continue to focus on smog-prone areas like Beijing, Tianjin, Hebei province in the north as well as Yangtze and Pearl river delta, which includes Chengdu and Chongqing in the south.
There are concerns that corporations and local governments could become complacent after achieving the air quality targets of the previous five-year plan (2013-2017). Efforts are underway in Beijing to formalize compliance standards to regulate firms on a long-term basis. This include imposing “special emissions restrictions” on major industrial sectors, particularly in Hebei, to promote clean energy heating as well as to tackle the problem of scattered coal burning, which is the main cause of air pollution. It was reported that around 36,000 coal-fired boilers were shut down in 2017 and millions of households across Hebei have converted from the usage of coal to electricity or natural gas.
Under Beijing’s winter production restrictions, steel mill industries across China were ordered to cut productions for up to 50 percent from mid-November of 2017 to mid-March of 2018. Some reports suggest that authorities in Tangshan are intending to prolong the steel production restriction even after March. As of this writing, the duration of the extension and the expected production cutoff rate are unclear. As uncertainties loom large with new environmental policies to be announced in June 2018, disruption to supply chain is inevitable particularly in steel and coal industries. Those with production facilities in the aforementioned areas are advised to monitor local developments closely for potential impact.
In addition, Beijing is also urging industries to relocate away from urban areas. Through inspections by local authorities, certain small-size chemical plants have reportedly been forced to shut down, some even permanently. It was reported that a propylene derivatives plant was ordered to relocate to an industry park within six months which indirectly implies that the plant would have to be shut down due to the limited time given for relocation. As a result, a shortage of supply of chemicals in China is likely in the coming years.
Despite the increasing focus, authorities have yet to order cracker operators, modern refinery or propane dehydrogenation based plants to shut down due to the value they bring to the economy as well as the high cost of shutting down such facilities. However, at least three coal-to-polyolefins plants, including Hebei Haiwei group and Shenhua Xinjiang Energy Co. Ltd were forced by environmental inspectors to shut down their plants temporarily in Hebei and Xinjiang provinces due to their high level of production in 2017, which affected air quality.
With China’s achievement in attaining its air quality targets in the past five years, there is no doubt that it will usher in the Lunar New Year with more ambitious plans for a sustainable future. Authorities were able to cut down more than 25 percent of hazardous airborne particles known as PM2.5, which was achieved by reducing coal usage and cutting of factory productions from 28 cities in the north during winter. Shanghai and Guangzhou cities were also forced to cut 20 and 15 percent productions respectively. Success from the previous five-year plan may drive further stringent activities which is likely to have an impact on the supply chain & logistics on a wider scale.