Tangshan expands iron ore sintering curbs

China's Tangshan city has asked steel mills to stop operating from tomorrow until the end of this month all sintering and pelletising facilities that have not been upgraded to meet ultra-low emissions regulations.

North China's Tangshan, the country's largest steel-producing city, currently has a total of 33 sintering and pelletising units that are compliant with ultra-low emissions regulations, according to an earlier government notice.

Tangshan on 7 December had imposed a four-tiered restriction on sintering and pelletising with output cuts set at 30pc, 40pc, 50pc, 60pc and 100pc.

The widening of the restrictions reflect Tangshan's concerns about air pollution this winter, as climatic conditions have made dispersal of air pollutants slower than last year.

"We believe there is a rising likelihood that China will intensify winter production cuts in the next few months in order to achieve PM2.5 reduction targets," US bank Morgan Stanley said in a research note last week.

China last winter reduced its PM2.5 particulate matter emissions by 25pc, but a third of that reduction was aided by strong winds. Expected El Nino conditions could lead to less windy weather this winter, leaving smog to linger in areas. Without this natural clearing, north China will need more output cuts to meet air quality targets, Morgan Stanley said.

The sintering curbs could further pressure seaborne and portside iron ore prices, with mills likely to seek more direct charge material such as imported lump and pellet to meet shortfall in sintered ore supplies. The short notice period for the start of restrictions have likely left most mills with non-compliant pelletising and sintering facilities without adequate time to store up on sintered iron ore. But with profit margins of steel mills quite low, some mills may prefer cutting output rather than increase proportion of higher priced inputs in the furnace burden.

Tangshan has also asked mills to shut down blast furnaces from tomorrow that have not strictly followed the city government's earlier order on restricting steel output over November-March.

Tangshan had imposed restrictions on blast furnace output from November-March to control emissions. Mills were divided into four categories with restrictions ranging from 0-80pc depending on the emissions intensity. The city government recently named some mills that were not fully compliant with these restrictions and warned them to follow the restrictions notice to the letter. Some mills had damped blast furnaces instead of shutting these down.