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China's Tangshan sets winter pig iron output cut target

2 Nov 2017, 9.17 am GMT

China's Tangshan sets winter pig iron output cut target

Singapore, 2 November (Argus) — China's largest steelmaking city, Tangshan, plans to shut down 18.21mn t/yr of pig iron capacity from 15 November to 15 March, the city government said.

Tangshan has devised a colour-coded system to determine the size of cuts for each mill, which will be based on their emissions records. Mills in the red zone will have to make the steepest cuts of around 75pc of their output, while those in yellow and green zones will have to cut output by 50pc and 43pc respectively.

Key steelmaking areas such as Tangshan, Handan and Tianjin are among 28 cities in north and east China that will reduce pig iron output by 50pc in the November-March winter heating season, when emissions typically spike by 30pc because of a rise in coal use to heat homes and offices.

The China Steel Logistics Professionals Committee has projected that crude steel production will fall by 31.5mn t during the winter heating season as a result of the measures, while state-controlled Chinese investment company SDIC Essence Futures Research has projected a 46mn t decline.

Steel prices are likely to be supported by the production cuts, as no significant restrictions have been imposed in steel-consuming industries such as construction, machinery or automobiles.

But iron ore prices may continue to fall, at least until the end of the year, as mills reduce iron ore inventories and even sell some of their long-term cargoes.

Iron ore futures on the Dalian Commodity Exchange and Singapore-based SGX for the first half of 2018 have moved into contango over the past few days, on expectations steel and iron ore demand will rise after the winter. Market participants are not expecting any uptick in iron ore supplies at least until June.

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