Cleaner Olympic air comes at a price

Factory shutdowns and other industrial restrictions intended to help reduce Beijing's eye-searing smog for the Olympics are making business more complicated – and costly – for Chinese providers of steel, pharmaceuticals and other goods and services.

The financial impact of the disruptions is hard to estimate, and China's exports should not be greatly affected, because suppliers had months to prepare, analysts and company representatives said.

Still, manufacturers have spent extra to produce and warehouse supplies ahead of the games, or to arrange special transport.

These costs come on top of the $40 billion the government is spending on Olympics venues and improvements to Beijing's infrastructure.

Ordered to shut down its blast furnaces to help clear the air for the 10,500 athletes and 500,000 tourists expected for the games, steel producer Beijing Shougang Group embarked on a massive effort to ensure its customers would not be affected. The company, a key supplier to China's booming construction industry, ramped up output in the first half of the year so it could fill orders during the shutdown, and it shifted some production to a mill outside Beijing.

Once the games and then the Paralympics end in late September, Shougang will ramp up production in the final quarter, said a manager who asked not to be identified by name because he was not authorized to talk to reporters.

Shopkeepers and manufacturers throughout Beijing will suffer from rules that ban trucks from the Chinese capital, making deliveries more costly or impossible. They will have to cut operations or pay sharply higher prices to move goods by van. The city already has banned 300,000 older trucks and other vehicles since July 1.

The controls also are disrupting less-visible industries such as pharmaceuticals, where China is a major supplier of materials such as penicillin used by global producers for drugs sold in the United States, Europe and elsewhere.

“The supply of some raw materials was indeed affected by restrictions during the Olympics,” said Xu Xiaofang, a spokesman for GlaxoSmithKline China. “Since we were informed about the restriction in advance, we have stored appropriate supplies.”

Pollution controls will require more than 150 steel, petrochemical and other industrial facilities to suspend production for the games, the official Xinhua News Agency reported, citing Zheng Jiang, vice chairman of Beijing environment bureau.

The interruption of steel production is expected to have little effect on trade because most of Beijing's output goes into construction, said Linda Lin, a Shanghai-based analyst for the industry newsletter Metal Bulletin.

She said only 15 percent of China's steel production last year was exported.