2017 PREVIEW: Environmental inspections squeeze metals producers

As a major producer and consumer of minor metals, China is the key driver of prices globally.

With few exceptions, price changes follow the Chinese market as supply and demand levels rise and fall – or at least are reported to rise and fall. In 2017, however, one of the biggest influences on prices will be environmental inspections.

The most recent five-year plan is intended to improve the state of the environment after years of industrial growth. There have been two rounds of state-level inspections in the past 12 months.

“The government is fighting pollution and environmental degradation, after decades of growth have left the country saddled with problems such as smog and contaminated soil,” China’s Ministry for Environmental Protection said.

We have already seen the effects of these inspections on prices for some metals, and sources believe that this will ramp up in the coming year as the government focuses on improving the state of the environment.

The environmental ministry released its “Notice on implementing the complete emission compliance plan for industrial pollution sources” on 15 December. It expects certain industries – including metals production – to be compliant by the end of 2017, and for all industrial production to be compliant by 2020. 

“By the end of 2020, all industrial sources shall meet emissions targets continuously, environmental governance systems will be improved, and environmental compliance will become a normal status,” the ministry said.

In November, the central government dispatched seven teams in a second round of inspections to seven provincial regions – including Beijing, Shanghai and Guangdong – to review local government work.

According to the environment ministry, these teams have looked into 1,893 cases and fines totalling 66 million yuan ($9.6 million) have been imposed in 1,479 of the cases.

Inspections are not limited to minor metals producers. The ministry has given verbal warnings to senior officials at Luliang City in north China’s Shanxi Province and the Aluminum Corporation of China for failing to deal with pollution cases appropriately. They must deliver rectification plans or face harsher penalties.

Early in 2016 antimony prices rocketed as a result of border problems with Vietnam, as they tend to around April every year. However, the problem was exacerbated by production difficulties at some plants that had to close following inspections.

Throughout the year inspections continued in various industries, with reports of smelter closures for indium, selenium, antimony and manganese production – as well as for some base metals – as the government forged ahead with its policy of both provincial and state responsibility for protecting the environment.

Some 15 closures were reported in November in China across the minor metals. Following further inspections in December, it is expected there will be many more.

Companies have dealt with the inspections in different ways.

The less-scrupulous operators shut down production ahead of inspections in order to show low levels of emissions, in the hope that inspectors would accept their readings; others have made efforts to redesign their plants ahead of the inspections so that they fall in line with regulations; and some have attempted to future-proof their projects by completely preventing all emissions.

There were indications early in 2016 that protecting the environment could be a factor in pricing in the year ahead. However, on a recent trip to China, Metal Bulletin spent a few days touring various plants and the same theme kept coming up: the need to keep in line with or ahead of burgeoning environmental regulations.

Vital’s new 25,000 tpy “Cleantech” plant in Guangzhou, for example, was designed to prevent emissions completely because the company believes that ultimately this is the direction that regulations will take (as they have in many parts of the world).

“The biggest challenge environmentally for most companies is to manage the wastewater treatment,” Vital vp Mark Zhu said.

Meanwhile, a visit to Hunan Jinwang’s bismuth smelter showed the lengths that companies will go to in updating their facilities to prevent emissions, with all water treated on site and fed back into the system where possible.

“We try to recycle everything: the excess energy from the furnace gives the plant hot water and electricity; we clean and reuse the wastewater, so very little is lost,” Ryan Wu told Metal Bulletin. “Environmental costs are one of the biggest costs for us at the moment.”

Zhuzhou Keneng has a similar system, and has now bought a new site to reconstruct and expand its smelter, which will also completely prevent emissions or leaching of any kind.

What is clear is that minor metals producers are focusing harder on their environmental responsibilities, and are attempting to future-proof their facilities by limiting the emissions produced.

“We have seen the environment agency attaching greater importance to environmental detection and the employment of much stricter environmental protection policies, which has led to a lot of shutdowns or production halts for rectification,” a Chinese trader said.

It remains to be seen whether companies and local governments will hit the targets set by the state at the end of the year, but rest assured that they will be trying to do so – and this could result in higher costs for producers and their customers over the next 12 months.