Premier Li Keqiang sacrifices steel production for clean air in China

The slowdown in the economy in China and the tightening of government measures against environmental pollution are negatively affecting its steel mills. At the same time, the world's largest alloy producer is contributing to a potential downturn in global iron ore trade.

As a result, 2 percent of steel production will be eliminated this year, an industry researcher in China said. At the same time, steel production will slow to a 3 percent growth rate from 7.5 percent last year. The worst hit will be the old, private factories that have become the backdrop for many interesting movies and which the government considers ineffective and the greatest sources of air pollution that cause public outrage across the country.

Premier Li Keqiang declared war on air pollution in March, sending a signal that the state is unwilling to continue sacrificing clean air for rapid growth. Moody believes that smaller factories are being squeezed out and larger ones, including the Baosteel Group Corporation and the Wuhan Iron & Steel Group, are gaining significant market share.

The government wants a reshuffle in the steel industry. The fight against pollution will help consolidate towards a more efficient capacity in China's steel sector. According to experts, there are more than 300 factories that have blast furnaces that consume iron ore. This year, as many as 10 factories, with an annual capacity of 10 million tons, may close or curtail operations. This is enough to create panic in the market. China produced a record 779 million tons of steel last year.