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Market bracing for impact of new curbs on “2+26” cities

Beijing’s shift of its focus onto detailed air pollution control guidelines for the “2+26” cities over October 1-March 31 2019, which differs from the specific and detailed blanket control over polluting industries including steel on their capacities, will by no means suggest the loosening in control or lower severity in essence from the 2017 winter”, according to Chinese market sources on Friday. 

An official notice released by China’s Ministry of Ecology and Environment (MEE) on September 27 set the general target for these cities around the Beijing-Tianjin-Hebei area to decrease the concentration of particulate matter 2.5 (PM2.5) by 3% on average and the number of heavy-polluted days by 3% on average too year on year. 

Related city governments, on the other hand, will be the decision makers in formulating detailed and specific restriction measures according to their individual conditions among key industries including steel, coking and nonferrous smelting and refining to fulfill the air pollution control targets. All the measures are to be submitted to the central government no later than the end of October.  

The final version of the notice, just as reported earlier on, has abandoned last year’s practice by listing out details such as capacity cut ratios of each industry in each city, highlighting, though, that the industrial enterprises already completing the upgrading of eco-friendly facilities and meeting emission reduction requirements can be exempted from the curbs. 

A Beijing-based market watcher, acknowledged that Beijing’s change of strategy just to illustrate that it has delivered its promise of not to impose “one-for-all” capacity curtailments measures upon all the enterprises in each related industry. 

“In principle, Beijing has set an ultimate goal for local governments but has given them the flexibility to choose how to achieve it, which shows that the central government is more experienced and has a better system for supervising production curbs, enabling it to be less rigid and ruthless in imposing detailed measures,” he said. 

However, “the new MEE approach does not mean that there will be no curtailments or less severe restriction,” he argued. 

An official from a steel mill in North China’s Hebei province shared the view, pointing out that MEE’s new means of control “has left the room for cities to take their own initiatives and will be fairer to those steelmakers that have made greater efforts and heavier investments in environmental protection facilities”.  

Tangshan city in Hebei province, for example, is the first among the “2+26” cities to have released the detailed curbing measures on its local steel mills’ ironmaking, steelmaking and coking capacities by categorizing its steel mills into four groups according to their pollution control efforts and varying the degrees of cuts from 70% to zero, as well as imposing the restriction on October 1, way in advance than last year’s November 15, as reported. 

“By doing so, Tangshan will be sending a clear message, encouraging local mills to upgrade their eco-friendly facilities and intensify their efforts in controlling their waste emissions,” a Tangshan-based steelmaker said. 

Last winter, the prevalent cut was 30-50% on steel mills’ blast furnace capacities, so this year’s 70% cut on those mills that are stubborn and unwilling to make extra efforts in reducing emissions further will much severer than last year, he pointed out.

The “2+26” cities include those located in Hebei, Henan, Shanxi and Shandong together with Tianjin and Beijing, and combined steel output of these six provinces and regions for 2017 accounted for 42.6% of the country’s total. 

Some other steel market sources, however, expressed their fear that the capacity restrictions in the 2018 winter, not as detailed and explicit as in 2017, may lead to higher supplies and price falls.

Written by Venus Wang, wangyi@mysteel.com

Edited by Hongmei Li, li.hongmei@mysteel.com