China aims to end port trucking of steel feedstocks

The Chinese government is aiming to move all haulage of iron ore and coking coal from the country's major coastal ports to either rail or waterways by November 2020, ending the use of trucks, as part of efforts to curb air pollution.

Steel companies must speed up construction of special railway lines connecting mills to major rail networks to reduce the use of trucks for last-mile transportation of iron ore and coking coal, Beijing said.

China's largest steelmaking city Tangshan has already announced plans to transport all iron ore and coal from port to steel mills on railway lines by the end of 2019.

The government expects 50pc of bulk cargo in the Hebei-Beijing-Tianjin region, the Yangtze river delta and the northern plains provinces of Shaanxi and Shanxi to be hauled on railways in the next two years, reducing dependence on diesel trucks and cutting emissions.

But there are doubts about the logistical and economic viability of such a massive shift in modes of transportation in such a short period. The move to railways could have a major impact on the landed cost of raw materials at mills, although whether costs rise or fall would depend on how efficiently the change is implemented.

The measures are part of a new plan by the state council, China's cabinet, which aims to reduce pollution sharply by 2020. The plan widens the pollution control drive to cover 80 cities in provinces including Shaanxi, Shanxi, Anhui, Jiangsu and Zhejiang, as well as the city of Shanghai, instead of the 28 cities in Hebei, Shandong and elsewhere that were initially targeted last year. Most of the cities will set their own targets for steel production in the coming November-April winter heating season, replacing the single 50pc target for pig iron output cuts that was imposed in the 28 cities last winter.

The new plan also proposes an accelerated shutdown of standalone coking enterprises in Hebei province by 2020 and reiterates a commitment to restrict Hebei's steel production capacity to below 200mn t/yr. Hebei produced 193mn t of crude steel in 2016.

Steel mills in urban, built-up areas will either be shut down or relocated to less populated regions, while any capacity replacement projects will have to meet strict conditions. The government said it will remain vigilant about any resurgence of scrap-fed induction furnace capacity, which it claimed to have completely eliminated last year.