PINE PACIFIC

CHINESE\\\'S ENVIRONMENTAL CONTROL AFFECT SUPPLY RAW MATERIALS

Previous Policy

Chinese government has enforced the environment law seriously this year. A few years earlier they had pushed all factories in the central provinces of China such as Henan, Shanxi, Hebei, Shandong and east coastal province to improve the production process in which some of them chose to move to remote area northwest such as Ningxia and Gansu province where less pollution control and affect less to environment due to near the dessert.

Current Policy

The new environment policy this year will take affect vastly all area in China in which the products that involves to our foundry Industry namely Ferro Silicon, Refractories Coke, SiC and carbon were affected directly. The big Ferro Silicon factories such as Erdos and other moved to northwest earlier but the products like carbon, Refractories and Coke had tried to improved process instead of relocation.

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Local government needs to take serious action to the policy from central government in which the team of central investigation can interrupt and punish local governors who do not comply with the policy. This affect clearly on the area that not far from the central government in Beijing, they shut down whole factories in Tianjin area and inspect one by one, who cannot change or improve the process in accordance with the requirements, they will be forced to return their land to the country.

Standard requirements from government such as clean factory area, dust collectors to control air pollution and water treatment system. These requirements affect to small and medium factories directly as they are unable to invest immediately in accordance with the above requirements, they were forced to shut down and can resume production once applied to the rules.

This situation made supply shortage, there are only the big factories can produce during this period, the demand soar higher than the suppliability, soaring price response to this situation as the traders or manufacturers had monopolized and increased the price as their will in which affect to situation more worse.

Ferro Silicon

The Ferro Silicon are required from steel mill as their main raw material. Most of the Ferro Silicon factories had moved to the northwest area (Ningxia and Gansu Province) beforehand where the remote area and dessert. These area required the infrastructures to control the environment at the beginning since they relocated there. Then only some of them need a few improvements such as clean factory, less dust and other emission afterward can carry on production. This is why now the supply of Ferro Silicon is enough which the price decrease a bit and stable.

The following is the photos shows the area of Ferro Silicon Factory in China after improvement.

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GPC

Most of the GPC and CPC situate in the central & coastal area such as Henan, Shanxi, Heibei, Shandong and Tianjin province. Some of these factories relocated to northwest beforehand but most of them still be in the area and were shut down. Unlike the FeSi, the GPC factories could not passed the requirements from central government as they relocate too slowlyto the new location in northwest (Ningxia & Gansu province).

The situation for GPC & CPC will continue, the price keep rising due to short of supply. The following reasons will spur this situation more badly.

1) The Communist Party meeting shall begin from Oct.12, which they will launch any new regulation to control pollution more seriously.

2）The winter season is coming, in which every household will need to heat up more in order to keeping warm in which consequently generate more air pollution.

3) The central government send new Environment protection group to local to re-check in Aug. and will continue.

4) The carbon factoriesare demanded to decrease half production quantity if they passedchecking; if not passing check, shall stop in the next half year.

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PINE PACIFIC CORPORATION LIMITED