China’s Tangshan imposes tougher curbs on steel mills
Over recent months the Tangshan government has enforced similar controls on polluting industries under its jurisdiction, but the notice on Sunday presages the toughest restrictions with the aim solely at the steel sector, Mysteel Global notes.
“Compared with the at previous government orders, this time the wording is harsher, and the restriction measures are comprehensive and versed with more details, indicating that the Tangshan government really means business,” observed Qiu Yuecheng and Dai Mo, analysts with Everbright Futures commenting on Sunday’s notice.
In the latest round of curbs, nearly 30 local steelmakers are required to curtail their operative sintering, converter and lime kiln capacities by half starting June 23 – the day the notice was issued – and must maintain them at that 50% level until the end of July. From June 27, these steel producers are required to begin observing 50% reductions on their blast furnace capacities, the notice said.
The six steel producers – whose environmental protection performance the government has appraised as good – are being rewarded with more lenient restrictions, being required to trim their operations by only 20% throughout the period, according to the announcement, and they are Shougang Qian'an Steel, Shougang Jingtang Iron & Steel Co, Hebei Wenfeng Iron & Steel Co, Tangshan Medium Plate Material Co, Delong Steel Co, and Hebei Zongheng Iron & Steel Group Co.
Based on the capacities of the blast furnaces/converters of each steel mill in Tangshan including the above-mentioned mills, and factoring in data relating to their current capacity utilization, Mysteel assesses that, if fully implemented, the city government’s restrictions will reduce molten iron output by 5.2 million tonnes/month, and finished steel production by 4.9 million tonnes/month.
The average capacity utilization rate of 138 blast furnaces in Tangshan is expected to dip to 59%, down by a huge 17.3 percentage points from the current level, Mysteel estimated.
News of the tougher curbs produced an immediate response in the city’s steel market on concerns of a possible reduction in supply, with Mysteel’s Tangshan Q235 150mm billet benchmark price, a key indicator of China’s steel market sentiment, gaining by a strong Yuan 70/tonne ($10.2/t) over the weekend from last Friday’s price to Yuan 3,530/t EXW and including the 13% VAT as of June 23, as reported.
As of Monday morning, a few steelmakers had already responded to the government order, such as Hebei Steel Group Huaxi Iron and Steel Co that had idled a 1,080 cu m blast furnace, while most steel mills in Tangshan quizzed by Mysteel Global were still drafting their plans.
“We have received the notice (asking for production suspension),” confirmed an official from a major steel mill in Tangshan. “We are still negotiating with the government on the curbing ratios and discussing internally on the plans. Once these are settled, we will apply the restrictions accordingly,” he told Mysteel Global on Monday.
The government’s latest round of mandated restrictions marks the second time this month that Tangshan authorities have escalated production curtailments. Less than ten days ago on June 16, Tangshan had raised the curbs on sintering and lime kiln capacities in certain areas to 50%, as Mysteel Global reported. However, this time, the focus of the curbs seems more directed at ironmaking and steelmaking capacities, Mysteel Global learnt from the document.
Market insiders generally believe this round of curbs will be stricter – possibly more so than any that Tangshan has announced to date, as this time, the local authority requested local steelmakers to publish their detailed curbing plans on the websites of the district/county governments or on local media on June 24, Mysteel Global learnt from the document. Then, by June 27 when all the facilities are stopped as requested, the steelmakers must post pictures and videos of their individual production sites as proofs to facilitate local residents to supervise the implementation.
Recently, steel mills' managements in Tangshan have been frequently invited by the city government for ‘private talks’, according to the Tangshan mill official, when most of the time they are criticized for high pollution emissions, he explained. “I feel the government is resolute in addressing the worsening air problem, so it will surely be imposing more pressure this time,” he told Mysteel Global.
Written by Lindsey Liu, liulingxian@mysteel.com and Olivia Zhang, zhangwd@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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