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Cement industry demise leads to painful transition

A cement town at the centre of China’s air pollution crisis is looking for a clean break, demolishing cement plants and building new roads and water treatment facilities to attract investment especially from former cement factory owners.

China’s economy and with it the frenetic pace of infrastructure construction are beginning to slow. This is good news for efforts to reduce air pollution but presents an enormous challenge for those towns and provinces that rely on servicing the country’s once insatiable appetite for building materials

Yi-an is a typical cement making town in Hebei province in China’s north-east. With a population of about 30,000, the town was known as a centre for cement making and until recently was home to over one hundred cement companies. Now, there’s only one.

The closure of so many firms may be a boon for the environment but it’s terrible for the local economy. With 60 per cent of the town’s GDP coming from its one remaining cement company, the deputy township head Li Zhigang has set himself the task of creating an “economic transition” to bring about a more diverse economy that’s no longer reliant on one sector.

Li is under no illusions about the challenge ahead though: Yi’an is “like a forest where decades-old trees have been felled, you have to plant new trees one by one,” he said.

For richer or for poorer

Yi’an lies in the hills to the north-west of Shijiazhuang, the capital of Hebei province, and close to large quantities of limestone. The first cement plant was built here in the 1970s and at the industry’s peak 166 were in operation, providing a living for seven in ten people in the area.

But as the industry expanded, pollution replaced poverty as the town’s main problem. Cement production far outstripped the local environment’s ability to cope with the toxic emissions, a by-product of the process, at times depositing a layer of cement dust on the town thick enough to leave detailed footprints in.

After being newly appointed in 2007, Li saw in the first round of changes to improve the environment. The most polluting part of the cement manufacturing process is the making of clinker, where the raw materials (such as coal, clay and limestone) for cement are heated in a kiln.

The type of kiln used affects how much pollution is released so cement makers were ordered to switch to cleaner ones. This reduced pollution but also increased costs. Many smaller plants were demolished and two new larger plants were built.

But reducing pollution from cement couldn’t solve the industry’s other problem: overcapacity. In autumn 2013, the State Council published a document on reducing capacity and in late 2013 and early 2014 Yi’an shut down 30 plants, leaving only two: Dingxin Cement, which had over 1,000 employees and was the 4th largest cement maker in the province; and a state-owned plant that was later shut down.

Yi’an is like a forest where decades-old trees have been felled, you have to plant new trees one by one.

Li Zhigang, deputy township head, Yi’an, Hebei Province

That second round of closures was particularly tough on the town’s people, according to Li:

“It’s a very difficult thing to do, to shut down a company. You’re not just taking food from their bowl, you’re taking their bowl. There’s bound to be anger and opposition,” he said.

At the time the public hadn’t realised that the concrete industry was in decline, and in the absence of new industries in the town, there was a severe jobs shortage. The rapid closure of cement plants also took a toll on local government income, which fell from over 100 million yuan (US$ 15 million) to just 15 million yuan (US$2 million). To keep it going, the local government was allocated the taxation income from Dingxin Cement.

Made in Hebei

Yi’an is Hebei in miniature, and in a sense Hebei is a microcosm of industrial challenges China faces as a whole. The province is the biggest producer of steel and plate glass in the country and one of the top producers of cement and sanitary ceramics. Its reliance on building materials means it depends on continued large scale investment in infrastructure. Many of China’s buildings, high-speed rail lines and bridges are “Made in Hebei”.

But all that steel and cement-making has left Hebei’s cities occupying over half of the places on a list of China’s ten most polluted cities. That pollution travels a long way and has become a major contributor of pollution in nearby Beijing and Tianjin.

Because of this the Beijing-Tianjin-Hebei region has seen tough air pollution measures. In 2013, the State Council released an action plan to tackle air pollution nationwide. In Hebei, air quality had to improve by 25 per cent over four years, a higher target than anywhere else.

Now, the economic slowdown and overcapacity has made reduction of capacity in building materials, such as steel and cement, a key part of China’s economic transition. Naturally, major producer Hebei had to take action first.

According to media reports Hebei removed 33.91 million tonnes of iron refining capacity and 41.06 million tonnes of steel refining capacity between 2013 and the end of 2015, accounting for 40 per cent of the reduction nationwide.

Large numbers of “zombie firms” – non-competitive companies that survive on government subsidies – were finally closed.

But widespread and long-lasting smog in the final months of 2016 showed that things weren’t changing fast enough. On the worst day, December 20, one fifth of China was covered by smog, including Beijing, Tianjin and Hebei.

The Shijiazhuang government, worried about its air pollution performance for the year, announced shock treatment: polluting firms throughout the city would shut down until the year’s end.

Yi’an and its one remaining cement plant fall under Shijiazhuang’s jurisdiction and so did not escape. Dingxin Cement, now the bedrock of the town’s economy, stopped production. It was a difficult winter for Yi’an, and the need for a change had never been more apparent.

Cause for optimism

The town saw what was coming and has been making preparations. The first plants to shut down received government compensation, which might not have been the case if they’d waited longer. “The concrete market has been awful since 2014, and people have realised we were looking ahead,” Li said.

Since the first round of capacity reductions in 2013, a major part of Li’s work has been to find new opportunities for the workers and companies left idle.

The demolition of a concrete plant leaves resources such as land, transport and power infrastructure in place. The town is also building an eight-lane highway and a water treatment plant to draw in new investment. Former cement plant owners are looking for somewhere to invest their money.

“We’ve already got five projects up and running, five being built, and six under discussion,” Li said. The projects are smaller and cannot be compared in size and profitability with the former cement plants but it’s a start.

This story was originally published in Chinadialogue under a Creative Commons’ License and was republished with permission. Read the full story.

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