Chinese steel mills, already struggling with falling prices and weakening demand, are facing higher costs and the risk of punishment as a result of tougher environmental legislation that came into effect on January 1 this year, industry officials said on February 4.<br /> <br /> Nearly three-quarters of China's steel enterprises do not meet environmental standards, and they are under heavy pressure to upgrade, according to estimates by the China Iron and Steel Association (CISA). Compliance costs have risen at least around 50%, according to some estimates.<br /> <br /> Jiangsu-based Shagang Group, China's third biggest steel producer, said some of its facilities were not being used to avoid breaking the rules, said one senior official of the company.<br /> <br /> The official said the cost of compliance now comes to around 160 yuan/t ($26/t), putting further pressure on a sector already suffering from persistently low prices as a result of overcapacity and an economic slowdown.<br /> <br /> The CISA estimated last year that environmental compliance was costing Chinese steel mills around 55 yuan/t, with large state mills paying double that.<br /> <br /> "Standards are tougher and punishments are tougher - the fines are imposed on a daily basis and even scarier is that violating environmental laws has become a criminal offence and bosses could go to jail," said Li Xinchuang, vice-secretary general of the CISA.<br /> <br /> <p> Large Chinese steelmakers saw profit margins of just 0.85% last year, according to the CISA data, the lowest of all industrial sectors. </p> <p style="text-align:center;"> <img src="/upfiles/news/image/20150210/20150210144926_3170.jpg" alt="" /> </p>