The Country’s New Policy Represents a Major Challenge for Lead Enterprises in Henan

Recently, the Ministry of Environmental Protection and the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) jointly released the Change Sheet of Emission Standard of Pollutants for the Lead and Zinc Industry, adding special emission limits of air pollutants. Industrial sources expect that the move will bring about a shakeout in the lead industry which has been struggling due to emission control and excess capacity; furthermore, the inadequate policies and industrial structure will likely cause a wave of factory shutdown.

With the launch of many pollution control standards, the current air emission limits have become the state’s new goal in reorganizing lead enterprises. On January 1, the Change Sheet of Emission Standard of Pollutants for the Lead and Zinc Industry released by the Ministry of Environmental Protection and the General Administration of Quality Supervision, Inspection and Quarantine started to be implemented, targeting weak areas of lead production pollution control.

Due to its relatively serious pollution, the lead production industry has always been a key area of the state’s industrial pollution control. The emission is mainly in waste water and gas: the industrial water pollution involves heavy metals like lead and zinc, while the air pollution is waste gas containing sulphur and nitre. In the past, the pollution emission standard for nonferrous metal production was mostly a unified standard document. However, as industries differ in pollutant discharge and development level, without adopting standards that suit the development of different industries, it is difficult to meet the requirements of emission reduction, and to effectively prevent excess production capacity.

It was out of this consideration that in March 2013, the Ministry of Environment Protection issued the Emission Standard of Pollutants for the Lead and Zinc Industry, re-setting land, water and air pollutant discharge standards based on the characteristics of the industry. The national pollutant emission standard change sheet issued this time by the Ministry of Environmental Protection and the General Administration of Quality Supervision, Inspection and Quarantine involves the production of six nonferrous metals including lead, zinc and aluminum. For the lead industry, the standard stipulates the discharge limits and the monitor and supervision requirements of water pollutants and air pollutants generated during the production process of lead manufacturers, as well as the environmental impact evaluation, environmental protection facility design, environmental protection inspection and acceptance upon construction completion, and the water and air pollutant discharge management after operation starts for lead industrial enterprise construction projects,

The head of Anyang Jinshun Company Zhang Qide told the reporter that the launch of the new differentiated pollutant discharge standards according to the different development level of different industries can help to avoid the huge impact on economy due to overall industrial size shrinking caused by the indiscriminatingly tightened pollutant discharge standards.

This time it is required that lead industrial manufacturers will implement the new standard in water and air pollutant discharge instead of relevant regulations in the Integrated Wastewater Discharge Standard, the Integrated Air Pollutant Emission Standard and the Emission Standard of Air Pollutants for Industrial Kilns and Furnaces. The sudden release of the standard has caught many lead enterprises in the province off guard.

Although quite some people in the industry are negative about the new standard, industrial sources believe that with the reinforced rectification and tightened standard, our province’s secondary lead may have a chance of shakeout. The elimination of production capacity of small enterprises and the carryout of merger and acquisition may increase the lead price that has been on the low side.

This has been echoed by some enterprises. Mr. Liu of Sanmengxia Company said, as the company has relatively advanced production process, one large lead enterprise has approached them for a possible acquisition. Mr. Liu told the reporter that lead production in Henan is a traditional industry which constitutes major production capacity in the country. In recent years, there has been notable improvement in the equipment technical level of lead production, and key technical and economic indicators and environmental protection indicators have met and exceeded relevant national standards. Nonetheless, the lack of industrial development plan for lead recycling and comprehensive utilization has resulted in a fragmented status in the recycling and production of the entire industry. At the same time, the province’s lead enterprises rely heavily on overseas lead raw material, and the profit of lead production is meager. Therefore, the promulgation of the Emission Standard of Pollutants for the Lead and Zinc Industry will hit harder small and medium enterprises in the lead industry, but will present an opportunity for industrial shakeout for large companies.

For a long time the segmented state and the plethora of small and medium enterprises have put our province’s lead especially secondary lead production in an awkward situation where sophisticated and outdated processes co-exist. The business manager of a battery recycling enterprise in Xuchang said frankly that there is now cut-throat scramble for resources; the increasingly stringent environmental requirements have drastically increased the utilization and recycling cost of dangerous wastes like lead, as well as the cost of environmental improvement, and in order to reduce cost, there is vicious competition among lead enterprises at the source and the upstream, adding to the uncertainties in the normalized development of the lead industry.

If this round of shakeout is successful, the concentration of our province’s lead industry will be improved, the number of small and medium enterprises will drop dramatically, and large enterprises will benefit from the change. In fact, since the state implemented the access system of secondary lead last year, there has been obvious rise in the sliding lead price, and the market share of large and medium enterprises has also gone up.

However, even if technical approach is adopted to rectify the industry, most lead enterprises will still have a hard time. Zhang Qide told the reporter that currently lead production capacity is serious excessive, and even it is cut by half, it is still too much for the market to digest. Meanwhile, the bottom price of additional products makes the survival of lead enterprises even harder. “Similar to the situation of electrolytic aluminum, the shrinking market demand has put many lead enterprises in s dilemma where they lose money anyway whether they produce or not. Without relevant support policies, it would be difficult for the industry to pick up,” said Zhang Qide.

It is the multiple problems and less optimistic reality of the lead industry that has driven many large and medium enterprises in the province to go for transformation to create new profitability points. Some enterprises produce batteries using their current production processes [nonferrous business opportunity: 12V batteries], and others shift part of their business to electric vehicles and chemical fertilizers, consequently they have secured decent growth while the lead industry is struggling.

Lead-gold.net analyst Li Xiaohao told the reporter that lead production is different from other industries and has relatively more byproducts. Even if lead enterprises lose money in main products, as long as the sales price of byproducts like sulphuric acid and silver is high, they can still achieve good economic benefits. However, this year the sulphuric acid market is less than satisfactory, and lead and zinc enterprises make losses in sales, while the price of silver also experienced a big drop. For this reason, many lead enterprises have chosen to extend the industrial chain of byproducts to obtain benefits. These enterprises have good growth in the new industry thanks to the advantages they have in raw materials.

Yet only an adequate system can facilitate the re-standardization and re-development of the lead industry. Relevant people from a large secondary lead production enterprise said that at present many lead enterprises have submitted reports hoping that the province and the state can grant policy support to lead production enterprises. “Power generation enterprises can get the state’s desulfidation and denitration subsidies, and coal production enterprises are also entitled to relevant subsidies. The lead industry has the characteristics of high cost and low profit level, and it would not be good for its long term development if just requesting enterprises to improve environmental protection and production standards without giving them any policy support.”

It is learnt that currently the state’s policy support for projects is mainly reflected in tax reimbursement for battery production utilizing waste plumbic acid, and in heavy metal pollution control and the comprehensive utilization of renewable resources, while there is no policy support in air pollution control. For this, Li Xiaohao thinks that this round of policy is for plucking up weeds, and it does not mean that lead enterprises will not get support in the future. “In any country, it is not possible to avoid pollutant discharge of the lead industry. The structure of China’s lead industry determines the development steps of first industrial rectification and then market rectification. The present focus is on phasing out backward production capacity of lead and plumbic acid batteries. After this round of rectification, the state should release preferential industrial policies as soon as possible, establishing a unified national dangerous waste recycling and treatment center with the support of large lead enterprises, and granting certain industrial policy support to relevant enterprises. Reinforced law enforcement, solid industrial policies and support system are all necessary to bring the technological advantages of large lead enterprises in the province or even in the country into full play and thus secure sustainable growth of the lead industry,” Li Xiaohao said.