Shagang Group, China’s largest privately-owned steel producer based in East China’s Jiangsu province, began slashing production from October 19, as the severe power shortages had prompted the province to elevate controls on power usage, sources close to the steelmaker confirmed.
From the night shift on October 19, Shagang will cut rebar output by 60% and wire rod by 80% and suspend operations on its its hot strip and cold strip mills, as well as its medium plate mills, one of the sources disclosed, commenting ruefully “this time it is a real hit.”
Shagang boasts a steel capacity of 45 million tonnes/year of which 25 million t/y is in Jiangsu’s Zhangjiakou city. The steelmaker’s power consumption accounts for 30%-40% of the city’s total consumption, said a second source familiar with Shagang.
“Pressure is building (so) now the mill needs to carefully arrange its production schedule, because once it exceeds the limits, power supply to it will be cut directly,” he said.
The source noted that an official from the related administrative authority had once spent the entire day sitting in Shagang data monitoring office for power consumption to monitor the situation. This illustrated the degree to which the local government is paying close attention to the steel mill’s daily power usage, Mysteel Global notes.
Not just Shagang but all steel mills in Jiangsu began facing tighter controls on power use from October 19, even though the previous curbs in September had just been eased (albeit slightly) from early October, a Jiangsu-based industry source disclosed.
“The power constraints are creating a lot of uncertainties regarding steel supply and these are unlikely to be eased in the near term,” he stated, warning that severe power controls may last until the end of November at least.
The Chinese steel market reacted strongly to news of the tougher curbs in Jiangsu and Shagang’s response to them, Mysteel Global notes. On Tuesday, the most-traded rebar contract on the Shanghai Futures Exchange for January 2022 delivery rose by Yuan 122/tonne ($19/t) or 2.3% from Monday’s settlement price to close the daytime session at Yuan 5,546/t.
Written by Olivia Zhang, zhangwd@mysteel.com and Victoria Zou, zyongjia@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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