China may expand steel output cuts this winter

China may expand steel production restrictions to more cities this winter to reduce emissions during the heating season.

China has intensified environmental inspections in 80 cities this year compared with 28 cities in north and northeast China last year. The additional areas include 11 cities in the provinces of Shaanxi and Shanxi, as well as cities along the Yangtze river delta covering Jiangsu, Zhejiang and Anhui provinces and Shanghai city.

Special inspection teams will supervise measures taken by these 80 cities to reduce emissions during the autumn and winter months, including regulation of industrial production, said the ministry of environment, although it did not give details. The winter output restrictions may extend from November 2018 to April 2019 but sector-specific output restrictions have not been announced yet.

China imposed a 50pc reduction in pig iron output for 28 cities in north and northeast China during 15 November last year to 15 March this year. China's crude steel output still posted gains compared with a year despite these cuts, as steel mills stepped up the scrap charge in basic oxygen furnaces to compensate for lower pig iron output. The production cuts covered the largest and third-largest steel producing provinces of Hebei and Shandong. If production restrictions are imposed this year in Jiangsu, the second-largest steel producing province, it would have a deeper impact on production and steel supplies in the winter months.

China's steel sector accounts for only 10pc of the total number of large enterprises but contribute 33pc of the soot, sulphur oxides and nitrogen oxide emissions of all large enterprises, so inspection and regulation of this sector will remain a priority, said the ministry of environment. Steel mills in the Beijing-Tianjin-Hebei region will have to adhere to stringent emissions regulations for sulphur and nitrogen oxides and particulate matters by 1 October to stay operational, while these restrictions will be gradually applied to mills in other regions.