Tangshan mills heed warning, BF use sinks to 20-month low

Posted on 05 April 2021

There might have been some wavering at the start but blast furnace steelmakers in Tangshan, China’s top steel producing city, seem to have quickly realised their local government is committed to enforcing tough new restrictions on their operations to improve city air quality. Mysteel’s latest survey shows that during the two weeks since the government announced that all but two of the city’s mills must slash production, the capacity utilization rate of the 126 local blast furnaces had plummeted to a 20-month low of 58.5% as of April 1.

“Even though air quality has been good recently and there have been no emergency alerts, clearly the mills have all been observing the restrictions nonetheless,” a steel trader based in Tangshan observed Friday.

Tangshan, located in North China’s Hebei province, is home to 25 steel producers, accounting for around 14% of all the crude steel China produces. But the city is perennially ranked among the country’s worst in terms of air quality, as ranked by the Ministry of Ecology and Environment.

Prodded by an increasingly frustrated central government in Beijing – located just 150 kms from Tangshan – the city government announced on March 20 that 23 of the 25 steel mills under its jurisdiction must cut their operative steelmaking capacity by 30%-50%, with the restrictions to remain in place until the end of the year, as reported.

Initially, industry watchers were quietly sceptical about how fully the steelmakers would comply with the directive, but the government has dispelled any doubts about how rigorously it will enforce the restrictions.

“The mills don’t dare not to (implement) the cuts, at least in the short term,” the trader said. “The old days – when mills would reduce production when inspectors are checking and then produce as normal when they leave – those days are gone,” he observed candidly.

As a demonstration of its determination, earlier this week the city’s Bureau of Ecology and Environment assembled some 100 government staff to be stationed at each of the 25 steel mills, in order to monitor their restriction implementation and emission control procedures during days when air pollution is heavy. Rehearsals were conducted at three mills over March 26-27, according to a post on the government bureau’s website, under which the inspectors were coached in what to look out for.

Tangshan getting tough: Inspection staff visit mills

Source: Tangshan Bureau of Ecology and Environment.

 

In another example of the crackdown’s reach, 12 officials belonging to Tangshan Jinma Steel Group (Jinma Steel) and Xiao Tian Environmental Protection Technology Co – a Jinma Steel supervisory company – were arrested and detained after it was found that Jinma Steel’s production record data had been faked to pass government inspection, according to a post by the bureau on March 26.

“If these 12 people are sentenced, it will have a great impact on the market,” Wang Yingsheng, deputy secretary general of China Iron & Steel Association commented at an industry meeting the same day.

“Not matter how much money is offered to you, you must not dare do anything illegal,” he remarked, adding pointedly that if legal sanctions are used as part of the country’s efforts to curb output and reduce pollution this year, such enforcement will see the campaign realised “efficiently”.

Meanwhile, speculation remains in the market that the ongoing restrictions in Tangshan might be adopted elsewhere, such as in nearby Handan city, the second largest steel-producing city in Hebei whose air pollution issues are frequently as severe as Tangshan’s.

“There are worries that the curbing policy will be expanded to a wider scale, given Beijing’s goal of trimming crude steel output nationally this year. Such worries are giving support to steel prices while at the same exerting pressure on raw materials prices,” an official from a steel mill based in East China’s Shandong province said. For now, there are no indications that other city governments are considering following Tangshan.

However, Wang Jianhua, Mysteel’s chief analyst, says that the operational restrictions imposed on steelmakers in Tangshan will slash molten iron production there by around 3 million tonnes in April, as reported. Though he expects steel output to rise nonetheless this month, he cautions that if local authorities in Wu’an decide to curb production this month, steel production overall might decline.

As of April 1, the national average HRB400E 20mm rebar price stood at Yuan 4,924/tonne ($748/t), refreshing a 9.5-year high, while Mysteel PORTDEX 62% Australian Fines in Qingdao was at Yuan 1,138/wmt FOT, down Yuan 41/t on month.

Source : Mysteel Global