Posted on 28 Jun 2023
Most steel re-rollers in Tangshan, the major steel producing hub in North China's Hebei province, were requested by local authorities to halt operations from June 26 due to deteriorating air quality over the city, market sources confirmed on June 27. So far, the production restrictions only apply to re-rollers, with sintering and blast furnace operations among integrated steelmakers being unaffected, Mysteel Global understands.
When the emergency curbs will be lifted remains unknown, but based on previous cases, the duration will largely depend on when the local air quality improves, according to a Tangshan-based source close to the market.
Monitoring by China's Ministry of Ecology and Environment on June 27 showed that Tangshan will experience moderate to heavy atmospheric pollution during most days over June 27-July 1.
Mysteel's latest survey of 35 section re-rollers in Tangshan showed that on June 26, their operational rate had dropped fast to around 15%, compared to the 40.4% average run-rate recorded on June 21. Moreover, the output curbs could see the daily production of sections among the 35 re-rollers plunge by 42,100 tonnes/day, according to Mysteel's survey.
"In fact, some re-rollers in the city had started reining in or halting their production voluntarily since mid-June, after bearing losses on selling section steel and with steel stocks at their plants mounting for some time," the Tangshan source told Mysteel Global.
In fact, before the restrictions were announced, that 40.4% average operation ratio on June 21 among the 35 section re-rollers in Mysteel's survey was already 2.1 percentage points lower on week.
Recently, Tangshan's prices of finished steel including sections have weakened due to falling demand among end-users, because work on construction sites in many regions of China has been disrupted due to high temperatures and heavy rains, a Shanghai-based market watcher explained.
For example, as of June 26 the price of Q235B 25# I-beams in Tangshan had decreased to Yuan 3,950/tonne ($547.5/t) EXW and including the 13% VAT, falling by Yuan 140/t from June 19, according to Mysteel's assessment.
"Now, when China's steel market faces loosening steel supply at a time when demand is slack during the summer off season for steel use, any emergency production curb on Tangshan's re-rollers – even if it lasts a week – may do little to make supply-demand fundamentals healthier," the second source explained, concluding that finished steel prices will still face downward pressure next month.
Source:Mysteel Global
