For years, we have been hearing about the risk of overcapacity in the steel sector.  It was an industry that was early on driven very hard so as to provide the materials needed for China’s boom, but it was one of those industries that was clearly overinvested in to the point the government had to step in on several occasions to slow things off.

However, even with all the reports of the risks of over capacity, it never hit… until now.

According to the article, Traders and mills join hands to survive winter in Hunan:

A dozen of steel mills and traders in Hunan, including Lianyuan Steel, Xiangtan Steel, Pingxiang Steel, Shuicheng Steel and Dahan Logistics have attended a sodality October 26th to discuss the current market situation, and hold out a gesture to link-up with each other to survive the chill winter.

The catalyst for the meeting is best described in the following paragraph:

Rebar and flats price has fallen to some CNY 3,000 per tonne from the peak point of CNY 6,000 per tonne, almost been halved. Our export tonnages post at 50,000 tonnes to 60,000 tonnes a month in the first half, but plummet to merely 2,000 tonnes in October

Where this article has my interest is that this is an industry that really should be on fire, and growing. there are rail road projects, port projects, highways, metros, and a few billion sqare meters of building space all under construction.

Yet, 12 steel mills and traders are banding together to survive?

Something just doesn’t add up for me.

VBS TV has just posted an amazing series on Lifen’s air pollution problems. Shot on scene over a week, this series will give you a clear representation of what challenges China’s growth has brought with it. Personally, while I have not been to Lifen, I have been to plenty of cities that are facing similar challenges, and it is distressing sometimes to get off a plane and literally be able to taste the products that a city produces.

In my mind, I am still scratching my head as to why Lifen and the other 15 cities on the most polluted list do not have programs in place to ensure that all the entities who play a role are being given assistance in paying for technologies, and are then being monitored to make sure they are using the technologies.

It is a problem that can be solved, and it is one that if left to continue will only get worse.With that being said, and with the finger pointed, I would like to also point out that there are solutions and that things are beginning to change, and western consumers themselves have a role in this as well.

Last week, Charlie McElwee from Squire, Sanders, & Dempsey sat down with me to discuss environmental law in China.  Charlie is someone I met through the What if, What Else, and What are the Odds roundtables I put together last year, and ever since I have been following his blog China Environmental Law.

One of the clips from this interview, the rest I have posted on Crossroads, I thought would be interesting as a catalyst for conversation on All Roads.

Within Shanghai there are probably 20 people that I know of/ speak to who are somehow involved with this topic, and one of the interesting things about this topic is that everyone has their own definition of sustainability.

This is Charlie’s.

So, now that you have heard Charlie’s definition, what is yours?

If you were to just read the popular press, it would be easy to laugh at the term “green Olympics”.  Journalists carrying hand meters taking air measurements, cyclists wearing face masks, and even air quality widgets all provide a bit of comedy to what is the serious conditions that their hyper development has created.

The problems though are much more complex that smog, will continue to be serious issues for the 1.3 billion residents of China, and while the government is taking “draconian measures”to reduce the air pollution, there are a lot of other issues to solve and programs/ technologies that are being put in place as part of this Olympics that will improve the quality of life for 20% of humanity.

Earth to Tech’s article 10 Cleantech Companies Greening the Olympics has stepped out of the smog box to look at 10 firms whose products are part of the larger “green Olympics”.

Ranging from LED lighting, clean water, energy management, and mass transit, the products and technologies highlighted will surely see a huge boost as they leverage the benefits of their programs to Beijing’s residents ongoing.

Part of the fun of being a “blogger” is “access”, and a couple of months ago I got a couple of friends to sit down in front of the camera to discuss their project, the URBN Hotel.

Actually my first post at Cleaner Greener China, where I think this is relevant for All Roads readers is that this project is a prime example of the projects that are available in China for those here, and is one of those projects that has garnered so much buzz that many of the concepts it is pushing forward will make their way into the mainstream.

Hope you enjoy it.

Part 1

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I really could not resist this one, but on my RSS feed I received two hits on my China youtube fee entitled China Goes Green… and the show just how going green in China has a number of meanings.

China Going Green #1

China Going Green #2

As you know through my writing here and at Crossroads, I am generally very concerned about China’s environment, I am seeing a lot of reasons to be optimistic, but before things really improve we will see more flare outs.

Current TV has just released their newest installment City on Steroids, and it should not be missed.

Shot in Chongqing, this segment is broken into three parts,

• Day 1 -Bang Bang Men (porters), rampant construction and individual home ownership (every young couples dream),
• Day 2 – life of a bang bang man, migrant appreciation day,a trip to the market
• Day 3 – a trip to Lifan’s car production facility, a look at the shadow that is Chongqing’s skyline, a trip to an English school to discuss the price of progress, and a last stop to visit Mr Rong’s apartment.. under the bridge.

For those that have only been to Beijing or Shanghai (particularly Shanghai), I think the most important things to understand are:
1) This grown is occurring in cities all over China: Chongqing, Chengdu, Xi’an, Kunming, Shantou, Nanchang, and countless others
2) There are large numbers of people in China who are willing to sacrifice everything to live under a bridge to eek out what they feel is a better life for themselves and their family
3) The environmental costs of the torrid pace are tremendous, and eventually Mother Nature is going to ask for the check.

As a quick follow up to a post I made last week, I am becoming increasingly concerned about the energy situation in China. It is something I have been thinking about for quite a while, and was unfortunately proven right a few months ago. more importantly though, I have been seeing a number of signs (Shanghai commercial lights off @ night) and hearing that there are still rolling power outages in what are typically areas with enough energy.

Then, Forbes last week reported that More than 70 pct of China power firms making losses,

the China Electricity Council said that 40 pct of China’s 4,773 power firms made losses in the first two months of the year, and that profits were down across the board as a result of record high coal prices, fixed tariffs and the freak weather conditions that struck southern China over the period.

and, today the People’s Daily China’s power coal reserve falls to 12 days amid rising prices

The nation’s entire coal reserves slumped to 46.69 million tons as of April 20, down 12 percent from 53 million tons in the early March, said Wang at a news conference on Tuesday.

The national stockpile was only sufficient for 12 days of consumption, three days fewer than the March record. Coal inventories for plants in Anhui, Chongqing and Hebei were only enough for less than a week, he said

But, more than these stories, where I would like readers to focus, is last week’s Reuters article China to update rail lines to boost coal supply where some real insights into just how difficult the problem will be short/ medium term will be (I have added the numbers):

1. Some 19 lines linking top coal areas in the north to ports in the east would be updated or rebuilt, increasing transport volume to 1.7 billion tonnes, said Dong Yan at the Institute of Comprehensive Transportation of National Development and Reform Commission.

2. Some 200 million tonnes of coal was taken by truck each year from producers in places such as Shanxi, Inner Mongolia and Shaanxi to ports in the north and east

3. China’s coal consumption would rise to 3-3.1 billion tonnes in 2010, and to up to 3.3-3.7 billion tonnes in 2015, which compared with 2.54 billion tonnes in 2007, driven by strong demand from power plants, Dong said.

Add all this together…

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Last week, we saw the best turnout yet with 8 people representing VC, law, academia, IT, and finance for our 3 hour discussion on China’s water problems.

Considered a boring topic by many, it is probably going to be one of China’s (dare I say the worlds) biggest problems going forward.. and as such, importance trumped interest.

What is interesting about the issue, is that it is complex. There are a lot of things occurring in China that we discussed that have a significant impact on China’s water supply, and it is going to take consumer awareness, changing habits, technologies, and a little bit of luck to avert major problems.

Below are some of the nearly 4 pages of notes I took from the event, and I hope you will chime in with your thoughts on the topic as well. There is a lot at risk here, and with over 1500 readers a day I am hoping that we can get some dialogue going on what every one of use should recognize as a very important issue.

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Yesterday, my post Senior Economists: China to Surpass by 2025 – Me: HOW? looked at the fact that China would need to overcome some large raw material barriers to maintain a level of growth that would propel the economy past the U.S.’s.

With oil going about 105 USD per barrel this week though, I think we have found a point on the curve where China’s sustainability see a barrier… as at this level, where petro companies make more money by exporting their gas rather than selling it domestically (I think)

My proof? 3 days I ago I began seeing lines of motorcycles in my neighborhood waiting for gas… and today while riding out to a migrant school, it was trucks. 20-30 deep… and,when asked, the bus driver was telling us that the lines were becoming worse and worse

Being at the front of the bus, I asked the driver about the current rations, and he told me that the current rations allow for each driver to buy a maximum of 200RBM of gas, and that if they need more they have to go to another station.

Now, I have done absolutely no research to understand how widespread this is, however I am going to make a guess that this is a phenomenon that only gets worse in the hinterlands.

Where this is important is that, as I discussed in China’s Economy is Running Out of Gas… Literally, transportation costs and delays are increasing (pay attention JIT exporters), price hikes are coming, and this issue will get worse as more cars hit the road.

i.e. the curve is no longer linear… it is becoming exponential (as the graph shows)

What do you think could be done? Petro China thinks a price hike is in order, but what about reducing the number of cars on the road? Will the strategic oil reserve help?

Update: Here is a interesting article on Petro China’s recent earnings release, where the opening paragraph is:

PetroChina Ltd. said Wednesday that profits rose by just 2.3 percent in 2007 as government controls blocked it from passing on record-high crude costs to consumers, though a Chinese auto-buying boom drove a 21 percent jump in total sales.

So, my last question is what would petro prices move to if they were priced to market?