Clearing the Air on China’s Non-Ferrous Industry
The People’s Republic of China has been accused in recent months of depressing the aluminium market to historically awful levels by flooding it with government-subsidized product. This frankly irresponsible and intentionally negligent action has wrecked the aluminium industry in several countries, and set aluminium producers on thin ice in several more.
This summer, likely due to the relentless international drumbeat of condemnation of its aluminium market manipulation, the Chinese State Council issued a note on structural reform in the non-ferrous metals industry. Recognizing the importance of the industry to China’s economy, the note points out that the market has fallen significantly in the past several months, and that adjustments must be made to account for broader economic realities.
The note urges a strict control on new capacity, ramping up the closure of capacity already destined for the chopping block, an overall increase in technological innovation, a push to find new ways to market non-ferrous metals, an improvement in the metal reserve system, and cooperation on the international stage. Underpinning these directives were several basic principles: strengthen the market, be driven by innovation, promote an orderly development of the industry, balance supply and demand, and do all of the above in an environmentally-friendly manner.
Chinese law has set national emissions standards for the aluminium industry. According to the relevant statute, a smelter may emit no more than 10.0 mg/m3 of particulate matter, 200 mg/m3 of sulfur dioxide, and 3.0 mg/m3 of fluoride. Additionally, thermal power plants may emit no more than 100 mg/m3 of sulfur dioxide, 100 mg/m3 of nitrogen oxides, and 30 mg/m3 of dust. Boilers over four years old are permitted to put out 200 mg/m3 of sulfur dioxide, and boilers built before 2004 are allowed to emit 200 mg/m3 of nitrogen oxides.
There’s no single firm that is responsible for the pollution, either. All of China’s major producers violate emission standards to some degree or another – Hongqiao (4,750 thousand metric tons), CHALCO (3,575 thousand metric tons), Xinfa (3,100 thousand metric tons), SPIC (1,533 thousand metric tons), East Hope (2,030 thousand metric tons), JISCO (1,430 thousand metric tons), and Zengshi (1,280 thousand metric tons) all have substantial capacity flagrantly violating emissions laws. All told, over 24,361 thousand metric tons of aluminium smelting capacity and 10,065 MW of installed power generating capacity runs in contravention of China’s emission laws.
The rampant and flagrant violation of environmental standards clearly arises out of a failure to enforce those same standards. Chinese air pollution laws dictate that a plant that is in violation will be asked to fix the problem, limit it, or suspend production altogether while paying a fine of up to one million yuan. If the violation is serious enough, authorities can put the violator out of business. Tampering with equipment put into place to monitor emissions standards could lead to a fine of between twenty and two hundred thousand yuan. Additionally, using high-polluting low-quality petroleum coke to fire a power plant could draw a fine of up to three times the price of coke.
However, with such a target-rich environment, the Chinese government evidently chose to look the other way. The Chinese Ministry of Environmental Protection (MEP) released a list of twenty-three smelters that were in violation of government standards, including CHALCO’s plants at Fushun and Baotou. And that’s where it ended. As of the time of this writing two years later, MEP has not announced what punishment, if any, would be exacted against the violators.
As bad as these flagrant violations are, the carbon emissions of China’s non-ferrous industry is even worse. China, which has been urged by the international community for years to get a handle on its carbon emissions, remains the biggest carbon emitter on the face of the Earth. The non-ferrous industry has been doing its part to keep China at number one. According to the latest numbers, each metric ton of aluminium produced by the top six aluminium producers releases over 20 metric tons of CO2 into the atmosphere. JISCO and East Hope have the dirtiest smelters, releasing around 21.5 metric tons of CO2 for each metric ton of aluminium on average. Hongqiao Group’s captive power plant at Weiqiao puts out 15.55 metric tons of CO2 per metric ton of aluminium it produces, and although it does not boast the highest volume of carbon per tone, because of its massive capacity, the plant is the most polluting one in China. The other five producers, who derive their power from the local grid, put off between 14.7 and 16.8 metric tons of CO2 per metric ton of aluminium on average. Over three tons of CO2 is released in the refining of alumina on average for the six measured producers. Two more tons of carbon come from smelting.
The numbers put the lie to the idea that Beijing had any intention to implement its economic actions in the non-ferrous metals arena. As it has done so many times before, the leadership placed lucre far ahead of environmental responsibility. Despite the Chinese government’s high-minded talk of addressing the economic problems plaguing the industry, their words ring as hollow as an empty beer can booted down a dirty street.