China’s top steelmaking city, Tangshan that had implemented winter production cuts from November last year till May’19 has once again imposed a 50% reduction in blast furnace sintering and pelletising operations for most of the city’s steel mills till the end of July’19. About 34 steel mills have been ordered output cuts after the Tangshan city came under fire from central authorities for disappointing results in smog control efforts.
According to the notification issued, steelmakers that are categorised as Grade A or located along the coast are required to cut capacity of sintering and pelletising machines, blast furnaces, converters, and lime kilns by 20%, while other mills in the region will face cuts of at least 50%. The curbs will no longer exclude mills that are set to relocate to rural areas.
Six steel mills, which have been graded A for their adherence to emissions norms, will have to reduce steelmaking operations by 20%, while all other mills will have to make a 50% cut in operations until 1 Aug’19. The six mills are Tangshan Steel, Shougang Qian’an, Shougang Jingtang, Delong, Wengfeng and Sinogiant.
Factors contributing to poor air quality in Tangshan
As toxic emissions grew, air quality in Tangshan ranked the worst among 168 Chinese cities in the first 20 days of June, when production curbs over steelmakers were let up. This is likely to put the city in the group of 10 cities with the worst air quality in the year-to-date rankings after June.
Excessive production, increased use of steel scrap, blast furnace capacity expansion and lethargic implementation of production curbs accounted for the increased air pollution in the month of June. This, together with adverse weather conditions, distorted data and the failure of some mills to achieve ultra-low emission standards, led to the deteriorating air quality.
The city government will make a decision on further restrictions after 1 August, depending on the air quality and meteorological conditions at the time. The city expects to reduce the concentration of carbon monoxide, sulphur dioxide and nitrogen oxides with these restrictions.
The anticipated production loss
As per the industry experts, strict implementation of the cutbacks is expected to affect the production of pig iron by 3.85 MnT, crude steel by 4.08 MnT, and disrupt demand for iron ore by 6.62 MnT. The curbs will also impact the local monthly capacity of steel plates by almost 2 MnT, and the monthly capacity of rebar and wire rods by 1.3 MnT. In the total output cuts, the steel plate products account for about 30% of the total affected capacity across local steel mills whereas rebar and wire rods took up more than 20%.
Production restrictions in the autumn-winter season of 2018-19 were quite loose and crude steel output actually rose over this period. But market participants expect the current set of restrictions to be more strictly implemented, which will boost steel prices.
Tangshan’s production cuts move came after the recent intensification of anti-smog measures in Wu’an of Hebei province, Lvliang of Shanxi, and Anyang of Henan after they failed to meet winter smog-cutting targets.
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