In March 2016, Mark Zuckerberg, founder of social networking website Facebook, posted a photo of himself jogging through Tian’anmen Square in heavy smog. The photo went viral in China and generated heated discussions on Chinese social media. Most urban Chinese residents aren’t as relaxed about the pollution situation as Zuckerberg. Stocking heavy-duty masks at home and checking air quality have become routine tasks.
Dense smoke discharged by steel plants is a major component of smog. In recent years, the iron and steel industries have become key targets for China’s environmental management. Environmental protection laws and regulations have become increasingly stringent over the years and are already exerting significant pressure on iron and steel enterprises. And China’s steel industry faces intimidating challenges from other factors. Against the backdrop of global economic slowdown and comparatively stable domestic demand from the real estate industry and urban construction projects, demand for crude steel has dropped sharply, leaving China’s iron and steel industries in deep trouble. For many affected enterprises, green business operation has become their last hope.
For a long time, iron and steel enterprises have been heavy polluters in China. At present, pollutants such as acid rain, smoke, and dust caused by the industry account for 7 to 14 percent of China’s total industrial emissions. And China’s iron and steel industrial emissions load is much larger than that of developed countries. For example, smoke and dust emissions per ton of steel production are only 0.25 kilograms at advanced international levels, while the figure is quadrupled for the average level of medium- and large-size iron and steel enterprises in China.
Installation of environmental protection facilities is crucial for clean iron and steel production. However, usage of such processes increases total production cost. For example, equipment featuring sintering desulphurization technology can effectively reduce acid rain pollution. But this technology bumps up the price of each ton of iron ore by eight yuan. Compared with large enterprises, it is understandably more difficult for small- and medium-size enterprises to cover environmental protection costs. Thus, their environmental protection efforts and efficiency differ greatly. The average operational spending of environmental protection equipment for Chinese iron and steel enterprises hovers at 55 yuan for per ton of steel production. For leading enterprises such as Baosteel Group Corporation, the figure has reached more than 100 yuan for per ton of steel production, while some small plants only spend 10 to 20 yuan for the same amount. Some smaller companies even turn off environmental protection facilities to save money.
China’s revised Environmental Protection Law, which was dubbed the “strictest in history,” took effect in early 2015. It toughens supervision and levies harsher penalties on environmental offenses. Enterprises that fail to meet emissions standards will be required to cut production or be shut down. Thanks to the mounting pressure, Chinese steel enterprises have increased investment in environmental protection equipment. By the end of 2015, non-compliant enterprises, with combined production capacity of 100 million tons, had been required to withdraw from the market.
In September 2016, China ratified the Paris Agreement on the sidelines of the G20 Summit in Hangzhou. Earlier, when Chinese President Xi Jinping attended the UN Climate Change Conference in Paris in late 2015, he reiterated China’s climate change commitments, including its pledge to cut its carbon emissions per unit of GDP by 60-65 percent from the 2005 level by 2030, and peak its carbon emissions by the same date. To fulfill these goals, Chinese steel enterprises will have to endure even stricter environmental constraints.
Pioneering Industrial Leaders
In late 1978, the piling work of Baosteel Group Corporation started on the banks of the Yangtze River in northern Shanghai. Across three decades of development, Baosteel has grown into one of the most competitive and modern iron and steel companies in China and the world. It has made the Fortune Global 500 list for consecutive years and employs more than 120,000 people around the world.
To achieve clean production, Baosteel reformed its production environment. Since 2013, Baosteel has invested 5.8 billion yuan in a closed upgrade of its raw material storage yard. It reduced space for material storage and built greenbelts between the production areas and living quarters, which not only reduced energy consumption, but also abated pollution in the surrounding environment. The enterprise has also developed abundant new green products such as high-strength low-alloy (HSLA) steel. Although it is more difficult to produce, HSLA steel can enhance fuel efficiency when it is used in motor vehicles, thus reducing air pollution. Since 2003, Baosteel has sold more than 14 million tons of HSLA steel for cars, reducing carbon emission volume by as much as a hundred 45,000-hectare national forest parks would, together.
Baosteel’s road to environmentally-friendly production has certainly witnessed ups and downs. In late 2014, one of its subsidiaries failed its environmental monitoring and was fined 45,000 yuan by the Shanghai Environmental Protection Bureau. After China’s revised environmental protection law took effect in 2015, law enforcement was strengthened and high-polluting steel enterprises faced more severe punishments. Against this backdrop, in 2015 Baosteel allocated more than 1.3 billion yuan as environmental protection funds, doubling the figure of 2014. Last year was tough for China’s steel industry. This year, with a crude steel production capacity of 1.2 billion tons, utilization rate dropped to less than 67 percent. For the first time, the country’s iron and steel witnessed an industry-wide deficit. Profits took a nosedive across the industry, and Baosteel was no exception. However, Baosteel Deputy General Manager Zhi Xiwei noted that a steel enterprise’s capacity to save energy and perform environmentally-friendly production would be decisive for its future survival conditions and competitive power. Baosteel’s investment in environmental protection in 2016 will be comparable to that in 2015.
Commitment to environmental protection has made Baosteel more popular in its hometown. Baoshan District in Shanghai is the major production base of the enterprise, and local residents have been greatly impressed by Baosteel’s environmentally-friendly measures. To support Shanghai’s efforts to replace and upgrade coal-fired furnaces in recent years, Baosteel generated power by recycling waste gas heat from steelmaking, and supplied electricity to its neighboring communities, reducing air pollution caused by burning coal. Baosteel’s energy conversion work has helped ease Shanghai’s environmental burdens, transforming the city’s discarded paint and paint buckets into raw materials to make steel. Now, its annual processing capacity has reached 8,000 tons. Reducing urban waste is another target of Baosteel. Nowadays, e-commerce provides incredible convenience for consumers, but also produces heavy volumes of packaging waste. Considering the space taken by landfills and the cost of incineration, Baosteel hopes to transform such garbage into fuel to make steel.
Baosteel General Manager Chen Derong once opined that his enterprise’s green transformation mission would be long and difficult. Compared with Baosteel, other Chinese steel enterprises face even greater challenges due to lack of funds, management, and personnel reserves. However, green upgrades are the only option for China’s steel industry, which faces not only commercial challenges, but worries that affect all of humanity.