Beijing's Torch Still Polluting the Skies

With smog still running rampant in Beijing, the Chinese government has been forced to take emergency measures to ensure Beijing's air will be clean enough to allow the Summer Games of the XXIX Olympiad to go off without a hitch.  Originally, Chinese steel mills within 300km of Beijing were ordered to reduce or temporarily halt steel production beginning as early as late May.  Rough estimates put the original cut in Chinese steel production at around 5%.  

As a result of the ever-persistent smog, however, an additional 220 polluting factories (including steel mills) in Beijing, Hebei, and Tianjin have now been ordered to temporarily shut down.  In addition, further steel production cuts in big and small plants in the cities of Zhangjiakou, Chengde, Shijiazhuang, and Tangshan - as well as throughout Hebei province (where 20% of China's steel is produced) - will be put into effect if the air pollution in Beijing remains at an unacceptable level.  Construction in Beijing may also be banned for the next two months.

Although Capesize freight rates have been only drifting down a bit as of late, there is real potential for the market to see a moderate temporary fall.  The Beijing Olympics is China's coming out party and the authoritarian state will do everything in its power to make sure things go smoothly.  If this means short-term steel production (and corresponding dry bulk freight rates) have to suffer, so be it.

(Image: The National Stadium - also known as the "Bird's Nest".  Photo taken July 28, 2008.  The gray stuff?.. it's not rain clouds).