Tough measures to clear the air will come at a price, report Wu Wencong in Beijing and Zheng Jinran in Tangshan.

Liu Dashan opened a paper bag and took out an apple only slightly larger than a squash ball.

“Without this bag, the apple would be covered in thick dust, just like I am when I go to harvest my fruit,” Liu said as he bent down and took a persimmon from his basket.

“The other farmers can sell their persimmons wholesale for almost 2 yuan (33 US cents) a kilo, but no one wants to buy mine, even if I set the price at 1 yuan a kilo, because the retailers say they are so dirty and deformed that they can’t get a good price for them.”

Liu, who is in his 60s, waved the fruit in his hands and pointed at his orchard 1,000 meters away, standing in the shadow of a steel plant.

Like many residents of Yutian, a county in Tangshan, Hebei province, he blames the private plant, which employs about 1,500 people, for the dust and pollution that are ruining his business.

The company says it has compensated Liu for his losses, but he denies receiving any money.

Uncovered piles of raw materials, including corrosive lime, were dotted randomly around the factory yard, and yellow fumes poured from the chimney of a blast furnace, blending with a gray sky.

Although the company recently installed dust-prevention and reduction technology, Liu said he hasn’t noticed a difference: “My mouth still gets clogged with ash when there’s no wind to disperse it,” he said.

Low utilization rate

Although “Beijing Cough”, the rasping respiratory ailment that’s become associated with the Chinese capital in recent years, has attracted worldwide attention and resulted in some expats relocating to healthier climes, airborne pollution is far worse in smaller industrial cities, especially those in Hebei.

Cities in the province regularly occupy as many as seven places on a list of the 10 most-polluted places nationwide, which is published by the Environmental Protection Ministry every month. As a result, the province, which surrounds Beijing, is always seen as the main culprit when talk turns to air pollution in the capital.

“No one - those who formulate national policies, environmentalists, the general public and the market - will allow Hebei to continue supporting industries that produce high levels of pollution but few benefits,” said Zhou Benshun, Hebei’s Party chief. “Projects that are profitable in the short term but do long-term damage will not be tolerated in the future.”

Shijiazhuang, Baoding, Xingtai, Tangshan, Handan, Langfang and Hengshui, the seven cities on the nation’s most-polluted list, have one thing in common: each is home to at least one highly polluting industry, such as coal, steel, cement and glass.

Hebei produced about 178 million metric tons of crude steel between January and November, outstripping the 169 million tons produced in 2012 by the 27 countries (at the time) in the European Union, according to the World Steel Association’s Steel Statistical Yearbook 2013.

The high concentration of steel works in Hebei is evident from the comparative sizes - the EU covers an area of approximately 4 million square kilometers, more than 20 times that of Hebei.

Although steel production is high, the utilization rate of 72 percent is low. In the United States and Japan, a rate lower than 78 percent is normally deemed overcapacity, according to China Metallurgical News.

Although some small companies went to the wall during the market downturn, others, especially, private enterprises, maintained profitability by lowering their costs through the use of cheaper, lower standard raw materials, by purchasing older machinery and equipment from rival companies or by blatantly ignoring government antipollution regulations, said Xu Xiangchun, information director of the industry consultancy Mysteel.

In an attempt to solve the problem, the central government plans to cut 80 million metric tons of steel production capacity nationally by the end of 2017, according to guidelines issued in October. Hebei will be required to cut 60 million tons out of the national total, while Tangshan, a city located close to Liu’s orchard, alone has a reduction quota of 40 million tons.

Tough remedies

The worst pollution requires the toughest remedies, so although the government has ordered that all blast furnaces of 400 cubic meters or less be dismantled, Hebei has implemented its own standard of 1,000 cu m.

“Although 75 percent of the steel produced in Qian’an is made in furnaces larger than the national standard, some businesses may still be affected because the provincial government is aiming to dismantle 80 percent of furnaces smaller than 1,000 cubic meters,” said Zhang Shuyun, the mayor of Qian’an, a county level city affiliated with Tangshan.

In addition to reducing production capacity, Hebei has also introduced policies, including consolidation through mergers and company restructuring, that will result in the number of steel companies in the province falling by 60 percent, according to information provided by the Hebei Development and Reform Commission.

Seventeen private steel companies in Wu’an, a county-level city in Hebei, will be merged to create three large entities, which will then be relocated from the downtown area to an industrial park 30 km south of the city. The move will cut total annual production to 7 million tons from 10 million after the restructuring.

“My company’s total investment in buildings and equipment has been 4 billion yuan in the last 30 years. But once we move, it will be worth no more than 10 percent of that amount,” said Yao Mingfang, chairman of the board at Mingfang Steel Ltd, one of the three giant companies created by the consolidation plan.

Yao said the 17 companies will suffer a combined loss of at least 3 billion yuan when production is cut by 30 percent, and that doesn’t take into account the physical and legal costs of transferring the companies.

The reduction in capacity will see the provincial economy lose more than 90 billion yuan per annum, and the income raised by local taxes - more than 200 billion yuan in 2012 - will fall by approximately 16 billion yuan, according to the Hebei DRC.

The tough measures will eventually provide cleaner air, but they will also result in a large number of Hebei residents losing their jobs.

Approximately 600,000 people will be affected and although the steel sector will lose approximately 200,000 jobs, related and service industries such as logistics, hotels and catering will also be hit, said Chen Yongjiu, head of the Hebei DRC.

Transferring the 200,000 people currently working in the core industry to new jobs will cost an estimated 2.6 billion yuan, he said.

Although State-owned companies traditionally absorb the lion’s share of job reductions because they employ so many people, it is easier for them to move into other areas of production if change is required.

Redeploying workers

Tangshan Iron and Steel Group Co, known as Tangsteel, the largest State-owned steel company in Tangshan, is working to reduce capacity on a large scale. The biggest challenge it faces is the redeployment of 21,000 employees currently engaged in its core activity.

“The company has been developing businesses unrelated to steel production for several years in sectors such as logistics, manufacturing, petrochemicals, real estate, services and education,” said Yu Yong, Tangsteel’s president.

In 2014, the company will move a further 7,000 workers from the steel sector to non-steel activity. Yu said Tangsteel aims to make non-steel business its most profitable division in the future and is targeting revenue of more than 80 billion yuan by the end of 2015.

But, after all the efforts and the high financial cost to the provincial government, local enterprises and residents, how clean will the air eventually become?

Wang Yuesi, a researcher at the Institute of Atmospheric Physics at the Chinese Academy of Sciences, said Hebei will have to do much more than simply cut its steel production capacity by 60 million tons to achieve a quantifiable improvement in air quality.

Compared with the province’s current production capacity of 280 million tons, the reduction is likely to just drag the output level back to where it was just a few years ago, when air quality was already extremely poor.

“With such a wide base for production capacity, a reduction of this scale simply isn’t enough and will still produce more pollution than the environment will be able to handle, said Wang.