Pollution heads south to Shanghai as steel mills driven from Beijing's environs

Chinese steel production is moving from its heartland in Hebei province in the wake of government efforts to tackle pollution near Beijing, but Shanghai could be paying the price as steel mills around the commercial capital ramp up output.

Stricter environmental checks in Hebei have also created opportunities for polluting industries such as cement and glass-making plants in provinces near Shanghai.

While air pollution rates in Beijing and nearby cities in Hebei have been relatively low over the past month, index readings in Shanghai and elsewhere on the eastern coast have hit record highs.

Following Beijing’s lead to eliminate steel production in the city, Shanghai cut its steel output by more than 10 per cent last year. But it could be suffering owing to rising production in surrounding provinces such as Jiangsu, where small mills are taking advantage of a sustained government effort to shut plants in Hebei.

Steel output fell sharply in Hebei at the end of last year but rose in Jiangsu, Anhui and Zhejiang provinces, all near Shanghai, according to data from the National Bureau of Statistics.

“We’ve seen production in Hebei dropping quite dramatically,” said Graeme Train, a Shanghai-based commodities analyst with Macquarie.