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China strengthened its fight against persistent smog and pollution in March by further empowering and restructuring its environment ministry and drawing up a new three-year action plan which promises tougher targets on industrial polluters.

The government’s push to cut air pollution air levels have been effective thus far with the shutdown of inefficient factories, detailed government-led inspections and a new “green tax” which has resulted in supply-side pressures on China’s petrochemical industry.

“This is very likely the most important trend in China’s chemical industry in the past two years or so,” said Kai Pflug, the owner of consulting firm Management Consulting – Chemicals which focuses on the chemical industry in China.

The impact of China’s environmental inspections have led and will lead to short-term production stops, while longer production stops may result as a consequence of chemical firms being forced to relocate, he said.

It may also take much longer to get permission for new chemical plants while production costs are expected to increase, Pflug said in a note.

Such factors could have an impact on the overall structure of the chemical industry, he said.

“The tightened environmental regulation will lead to industry consolidation as the weakest and smallest players will not be able to afford the necessary production upgrades. This will also lead to a reduction in overall capacity along with the improvement in technological level,” Pflug added.

Beijing’s war on pollution could also hit coal-to-chemical projects in the country, with the naphtha route to production now deemed more economical. Coal is the most polluting fossil fuel.

With the government’s embrace of a more environment-friendly approach to manufacturing, China has been requiring its industries to use gas for power generation instead of coal, also hitting coal-to-chemical production.

China has also been encouraging the use of natural gas instead of coal for winter heating, subsidising new energy vehicles to curb emission and implementing a winter air pollution plan which lasts until the end of this month.

The shutdown and relocation of chemical plants is also ongoing, with the southwestern province of Sichuan announcing that it plans to close nine chemical firms and relocate another 37.

In Anhui, six chemical plants were put on the closure list and 34 others would be moved into chemical parks.

Shandong province, one of the country’s biggest petrochemicals bases, is targeting to halve the number of petrochemical industry parks to 100 and close 20% of the 4,930 chemical plants in the province.

Jiangsu province plans to shut 2,077 chemical plants within this year and Hebei officials have said that they will implement new emission limits on water pollutants from July this year which is expected to reduce emission of chemical oxygen demand (COD) by 32.9% and ammonia nitrogen by over 58% from the 840 chemical firms in the province.

The National People’s Congress (NPC) annual meeting held this month saw key announcements which will shape how the country will clean up and restore the environment in time to come, with Premier Li Keqiang setting the stage by announcing plans to cut energy consumption per unit of GDP by 3%.

Furthermore, the government reshuffling unveiled during the NPC meeting saw the formation of the Ministry of Ecology and Environment, which replaces the Ministry of Environment Protection.

Li Ganijie, who heads the newly-approved ministry, announced on 19 March that China has tightened its targets for the country, with a new nationwide inspection system to be put in place which will give responsibility for regular checks on polluting companies and factories to local authorities in addition to the central government.

This followed an earlier Xinhua report on 17 March that said China’s central government alone has invested over yuan (CNY) 60bn into air pollution measures in the past five years.

The level of PM2.5 hazardous fine particle matter has dropped to 34 micrograms per cubic meter in January this year, the lowest monthly level since 2013, when China first launched a national air pollution control campaign, the report said.

Across the country, the average density of PM2.5 in 338 cities was 43 micrograms per cubic meters in 2017, falling 6.5 percent year on year.

China had previously set an official PM2.5 target of 35 micrograms, which is still higher than the World Health Organization’s recommendation of no more than 10 micrograms.

Earlier this week, Beijing issued its third smog alert this year, following the ones issued earlier in January and March, according to state media.

The “orange alert” which was in place from 26-28 March meant that factories were required to limit their output to 50% from the maximum allowed limit of 80%

By Nurluqman Suratman

Source: ICIS News