Air quality in industrial Chinese cities has improved over the last year, although pollution levels typically deteriorate further in the upcoming winter months, UBS says.
The bank drew its conclusions in an interesting research note on Chinese air quality. It follows earlier research in November, in which UBS said China’s focus on reducing pollution will have a broad impact on the commodities sector for years to come.
The bank’s analysts said Australian miners BHP and Rio are better placed to supply China with higher grade iron ore as it closes down less efficient industrial plants.
And the winter period from December to February will see even steeper cyclical production cuts, to offset increased energy use for heating.
Earlier this month, UBS said China’s Ministry of Environmental Protection (MEP) had approved the use of coal power in Chinese cities which didn’t have access to natural gas heating.
“This follows reports of farmers and schools freezing as clean fuel heating equipment had not been installed pre-winter,” the analysts said.
In an effort to keep citizens warm, authorities may relax the current pollution restrictions which were part of the government’s 2+26 plan initiated in 2013.
The plan “forces aluminium, steel and other industries to curtail production during the winter heating season” in Beijing, Tianjin and 26 surrounding cities.
While there’s some risk that pollution levels will increase over winter, tracking data compiled by UBS showed the average Air Quality Index (AQI) improved in annual terms in 24 of the 28 cities tested:
UBS tracks the AQI via air quality readings from the US embassy in Beijing, which has historical records back to 2008.
The bank also gathers data on air particles — such as the amount of dust and dirt in the air — from more than 2,000 stations located in China which contribute to the World Air Quality Index.
“Based on this data, it appears that the average air quality in October, November and early December in Beijing has materially improved compared to the last 2 years,” UBS said.
However, according to Berkeley Earth — a US non-profit which monitors land temperatures — pollution in Beijing is “still equivalent to every person smoking around three cigarettes per day”, UBS said.
“The AQI data is also clearly better than in winter 2015 & 2016, though it remains “unhealthy” at >100.”
UBS said the next four weeks will be key to the near-term pollution outlook, as increased heating requirements mean December is usually the most polluted month of the year.
The bank said initial indications are less than positive, with data for the last week of November showing that AQI increased to over 150 — seen as unhealthy levels of pollution — in half of the 24 industrial cities that UBS tracks.
This chart shows the average air quality across China’s 31 provinces nationally, where average AQI remains at the worryingly high level of 120: