Winter coming for one smelter, but what about the others?

Liaocheng smelter in Shandong province will close 30% of its smelting capacity next winter. The city fathers have announced they will implement cuts to factories in a wide variety of industries, including cement, steel, pharmaceutical, pesticide and aluminum.

We understand the smelter will run at top possible amps in the run-up to the shut-down.

The announcement comes from the government not the smelter, which is understandable and reflects what we reported last week. Local governments are keen to avoid jail time.

This year’s environmental inspections are working on a much tighter torsion than last year. Threats of jail for bureaucrats were around last year, but this year the rhetoric is much tougher. As we have mentioned previously, the central government and the Ministry of Environmental Protection have made it clear that local EPA and local government officials would be held accountable if efforts against pollution weren’t good enough. The fact that the decision to punish any official will be based on subjective analysis means that local bureaucrats have to over-achieve in order to avoid punishment.

But the trouble is, the local governments are working to avoid prison, not to reduce air pollution through strategic sustained action. Closing some factories while the inspectors are in town does not seem very smart to me. It suggests the local bureaucrats are hoping the inspectors don’t read the local newspapers, watch TV or talk to the local citizens, much less check what pollution levels those factories were running at prior to being closed.

There’s now no doubting that this time Beijing means business. Perhaps it is just a matter of time before the local governments get over their fears and get on with their jobs.

Meantime, the affected industries find themselves with no clarity on what the rules are, and are unable to make commitments that might get jeopardized if they get a close notice.

By the way, Liaocheng is very close to another much larger smelter, the Shandong Xinfa plant. It will be interesting to see if they are forced to follow suit.