Tangshan extends steel, sintering curbs to September

China's largest steel-producing city Tangshan has extended autumn-winter steel output restrictions to September this year, which could support steel demand and prices but may pressure demand for iron ore fines.

Tangshan in north China's Hebei province had adopted a four-tiered system to control blast furnace output at steels mills during 1 October 2018-31 March 2019. Those with a grade A score get to operate without any cuts, tier B mills have to cut blast furnace output by 30pc, C-grade plants need to make a 50pc production cut and D-grade mills have to cut pig output by 70pc and completely shut off iron ore fines sintering. Around 61pc of Tangshan's mills fall into the tier B group.

The city has divided itself into two groups 1 and 2 for April-September 2019. Counties in group 1 include Lunan, Lubei, Kaiping, Guye and Fengnan districts, Qian'an and Luanzhou cities, Luannan and Leting counties, Caofeidian district and the Haigang development zone. These areas will enforce blast furnace restrictions in the same proportion as over October 2018-March 2019 for May, June and July. Sintering restrictions for B and C-grade mills will be 50pc in this period, while A-grade mills will be at 20pc of capacity.

Regions in group 2 include Tangshan's high-tech industrial development zone, Fengrun district, Zunhua city, Qianxi and Yutian counties, the Lutai economic development zone and Hangu management zone. These areas will enforce restrictions on sintering and blast furnace in the same proportion as group 1 areas for April, August and September.

Steel rolling will be suspended in group 1 areas in May, June and July, while rolling will be suspended in April, August and September for group 2. The closure of rolling mills affects demand for billet.

Tangshan has reserved the right to increase these restrictions during heavy pollution alerts.

The blast furnace restrictions will support steel demand as construction activity is expected to pick up sharply starting April. But the continued restrictions on sintering, which have been in place in Tangshan in varying degrees since mid-2018, will continue to support demand for direct-charge material such as lump and iron ore pellet. Prices of imported fines are unlikely to be affected by the sintering restrictions, as supply shortages from major iron ore producers will provide sufficient price support in the short term.