AZ China can reveal that the draft air pollution regulations that got so many people worried have been approved and are already in force.
The air pollution regulations were issued by the Ministry of Environmental Protection mid-January as a draft for comment. The regulations include penalties such as a 30% cut to aluminum smelting capacity in the named areas, and up to 50% cuts to carbon capacity. The named areas comprise the cities and provinces around Beijing, and include Hebei, Henan, Shandong, and Shanxi provinces.
AZ China can report that the draft was finally approved on February 20, and comes into force from March 1. AZ China has a copy of the official regulations, but our sources have asked us not to publish it just yet.
We are aware of only one amendment so far. The draft regulations called for cuts of up to 50% on alumina capacity in the named areas, but the final ruling shows this has been toned down to 30%. We are still checking the 26-page document for any other amendments.
The speed at which these regulations have been converted from a draft to a fully-functioning regulation is astounding at first glance. The rules were approved by the Ministry of Finance, the National Development and Reform Commission and all the local provincial governments. The document that we have has the chops from 10 different government departments and local governments. To get so many bureaucrats off their tails – with Chinese New Year holidays in the middle – seems like an impossible task. But when one considers the crisis levels of air pollution in recent times, and the pressure being brought to bear by Xi Jinping, then it is possible that nobody wants to be the person that holds up the approval process. The fact that the Communist Party Congress is coming up would have also caused people to fall into line quickly.
Previously we have said that we think the impact on aluminum will be negligible, at least until next winter. Local governments would tend to protect their local GDP sources. But perhaps that’s the very reason why the MEP issued a press release last week, criticizing local governments for not doing enough to fight air pollution. That press release came out after the document was approved, so perhaps the MEP was firing a shot across the bows of the people who have to enforce these regulations. As I write, the jury is still out as to what the implications are, but it’s fair to say there is now a much higher possibility that these regulations will hurt the aluminum industry, and definitely hurt the carbon industry.
The entire AZ China team is today calling all the affected factories and companies to assess the market’s reaction to this. We will be bringing more information to you as we collect it. Keep watching these pages. We are also scheduled to be on the Reuters Base Metals Forum tomorrow, so no doubt there will be a discussion about these regulations then too.
More when we have it.