China's largest steel-producing city of Tangshan has announced an output restriction policy for December, which indicates steel and sintering curbs may be looser this winter than in previous years. This could pressure steel prices by keeping output near current high levels.
The city government in north China's Tangshan has exempted steel mills that have been graded A and B for emissions policy compliance from any steel and sintering output restrictions in December. Mills in grade C will have to conform to output restrictions, equivalent to restrictions enforced when a level 2 pollution alert is sounded, for all of December.
The city government has not specified the extent of output reductions grade C mills will have to make. Tangshan-based mills too are unsure about these restrictions. There is also uncertainty on what kind of restrictions will be imposed in January and February.
"My understanding is C-grade mills will not have cut blast furnace output at all and reduce iron ore fines sintering by 50pc in December," said the manager of a Tangshan-based mill. But the manager of another mill said there could be a 30pc reduction in blast furnace output.
Tangshan last year adopted a four-tier system to control mill emissions during 1 October-31 March. Mills with grade A score got to operate without any cuts, tier B mills were told to cut blast furnace output by 30pc, C-grade mills needed to make a 50pc output cut and D-grade mills had to cut blast furnace output by 70pc and completely suspend sintering.
The latest document also does not list mills in A, B and C grades. But a previous notice on production restrictions in October had put only Shougang Qian'an as grade A. Shougang Jingtang and Sinogiant were marked grade B, while other mills in the city were graded C. The numbers of mills in each grade may have changed since then.
The intensity of production restriction measures will be looser in December, which will boost output since most mills are making profits and have no compelling reason to rein in production, said the China steel logistics professionals committee.
Hebei province, which includes Tangshan city, is aiming for all steel mills to adhere to ultra-low emissions regulations by October next year, which will do away with the need for production restrictions completely from November 2020 onwards.
