Although China’s central government has committed to reducing the energy intensity of its economy, it has found it difficult to pursue this policy. The reach of central government does not always extend as far as individual companies. Small companies regularly flaunt central government decrees and regulations. Meanwhile, the ‘invisible hand of the market’ may be see-through because of its absence. Even when profits are hit, companies continue to invest in an overcrowded and polluted market.
SBB 14 April China’s central government has extended its 2009 ban on coke expansion projects to an unknown future date to meet its energy targets Steel Business Briefing learns.
In late September 2009, Beijing banned expansion projects until 2012 to reduce overcapacity and reduce pollution. However, the policy was not properly enforced by local governments, a central government notice states. Beijing is trying to reduce China’s carbon emissions by 40-45% by 2020.
An industry analyst in Shanxi, the country’s largest coke-producing region, tells SBB he assumes the ban will be extended for another three to five years. “China is facing heavy pressure on carbon emissions [from the international community], so it is unlikely for government to cancel the ban.”
However, SBB notes that there are still many upgrade coke projects on-going. “The coke industry doesn’t run well, but sometimes the coke plants can still earn money, and private coking coal mines will likely to build their own coke ovens [without applying for loans],” says the Shanxi analyst, “And if they don’t need loans the central government’s order will be ineffective.”
“Even if no new capacity is coming on stream, the existing capacity is already too large,” a Shanxi-based coke producer tells SBB. She adds that she holds a pessimistic outlook of China’s coke industry in the future. As SBB has reported, Shanxi’s coke industry saw small profit margins in 2010 caused by overcapacity.