China’s largest steelmaking city Tangshan in Hebei province has extended some restrictions on steel production and sintering operations for the rest of the October month which is likely to support steel demand in the country.
Tangshan city government has put the original curbs in place from 24 September to 7 October to ensure blue skies during the national day festivities in Beijing. However, on October 9, the city’s government ordered 29 of its 33 local steel mills to suspend their blast furnace production capacity by no less than 50% on average over October 10-31.
Under these cuts, mills with an A rating for emissions controls did not have to make any production cuts, but B- and C-category mills had to shut down sintering and pelletising production completely. C-category mills also had to suspend at least 50% of blast furnace operations.
Out of all the mills, only one mill, Shougang Qian’an, has been rated as A, while another two Shougang Jingtang and Sinogiant have B ratings and 30 mills have C ratings, according to the city government. Tangshan’s largest steel producer, Hesteel-owned Tangshan Iron & Steel, has been rated a C.
It is being estimated that the average utilization of Tangshan-based blast furnaces will be around 59% during October 10-31, up from 33% over September 28-October 2, but still lower than the 85% utilization rate over September 1-23.
As per the market participants, imposing restrictions on so many C-category mills may sharply reduce steel supply and iron ore demand this month. Mills could purchase more lump and pellet to increase the proportion of direct charge material in the furnace burden, displacing fines. C-rated mills have been further sub-divided into C1, C2 and C3 categories, but there are no details on how these sub-categories affect the restrictions, if at all.
However, a major concern is that how seriously these production cuts will be implemented as Tangshan had ordered large scale output cuts at blast furnaces in July and August also (mostly 30%-50% cuts) but the implementation of these orders turned out to be very poor. Thus, a section of the industry participants believes that only if air pollution is extremely serious, output cuts at Tangshan-based blast furnaces will be limited for the remainder of October month.
Tangshan, along with 27 other cities in north, east and central China, may soon announce separate steel and sintering restrictions for the November-March winter season. The central government has allowed cities to set their own winter output restrictions, with local governments likely to weigh pollution concerns and a slowing economy when deciding on these curbs.
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