Foreign media say that the week-long spell of severe, harmful smog in Beijing last month was unprecedented.
According to a March 13 report by Australia's Business Spectator, coal consumption by thermal power plants, steel mills and cement plants has long been the largest source of air pollution in northern China, closely followed by industrial dust.
The report argues that Beijing's environmental efforts will further limit the growth of China's steel output and may force many inefficient small and medium-sized smelting furnaces and steel mills to shut down. What distinguishes this crackdown on steel production from previous campaigns is that local governments are now held responsible for their environmental quality.
The report analyzes that all these actions may have two major impacts on Australia's iron ore industry. First, China will not increase its iron ore imports in the future. China's iron ore imports totaled 820 million tons last year, of which more than 300 million tons came from Australia.
Second, Chinese steel mills will seek higher-grade iron ore, especially ore with high iron content and low sulfur, moisture and dust content, because it can greatly reduce steel mills' environmental and coal consumption costs. As a result, the price gap between high-grade and low-grade iron ore will widen, which may determine the industrial structure of Australia's iron ore industry in the future.
In addition, the crackdown on steel production will also have a major impact on coal imports. In 2013, China imported nearly 100 million tons of coal from Australia. Although coking coal imports will be less affected by Beijing's new environmental strategy, thermal coal imports may bear the brunt in the near future.
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