China's top steelmaking city plans to extend output curbs to mid-November

27 February 2018

China’s top steelmaking city of Tangshan has proposed new restrictions on production once the current curbs expire in March in order to improve air quality, according to a draft document reviewed by Reuters.

Tangshan is the world’s biggest steelmaking city, producing more than the whole United States in a single year. Efforts to clean up the city’s air by shuttering capacity should be supportive for steel prices and limit the country’s supply of the alloy for the rest of the year.

Under the proposal from the government dated Feb. 12, the city’s mills will continue limiting production for 244 days between March 16 and Nov. 14.

The extended blast furnace restrictions will cover 9.875 million tonnes of steel production capacity, according to the draft, which is still in the consultation stage and could be revised.

Mills in the main part of the city, including the Tangsteel Company, a unit of the Hebei Iron and Steel (HBIS) Group, as well as the privately-owned Tangshan Guofeng Iron & Steel Co Ltd, will be ordered to cut production by as much as 15 percent.

Other Tangshan mills will cut production by 10 percent, but that could be increased if air quality worsens. Mills that have not obtained licenses to discharge pollutants will have to halt production.

Two sources familiar with the matter verified the proposal document. An official with Tangshan Development and Reform Commission, the city’s top economic planner, declined to comment.

The extension of the output curbs, though expected by the market, lifted Chinese steel futures by nearly 4 percent on Monday to their highest in almost three months.

Reuters reported on Feb. 1 that Tangshan was considering prolonging the curbs beyond March 15. The city said on Feb. 9 that it would draw up a plan to continue some curbs.

China ordered 28 northern cities to cut steel output by up to half during the winter heating season from Nov. 15 to March 15 as part of an anti-pollution campaign.

Tangshan in China’s Hebei province was ranked by the Ministry of Environmental Protection as one of the country’s 10 smoggiest cities last year.

Hebei produced 191 million tonnes of crude steel last year, nearly 20 percent of China’s total. Tangshan accounted for over half of that.