Tangshan applies steel curbs ahead of national holiday

China's largest steel-producing city Tangshan will enforce sintering and steel restrictions, according to a city government notice issued overnight.

The restrictions came into force at 12am Beijing time (04:00 GMT) on 24 September and will remain in force until further notice. The official reason for the steel production curbs is a level 2 pollution alert in Tangshan, although it comes ahead of a military parade and other celebrations planned in the capital Beijing to mark the 70th anniversary of the republic's founding during the first week of October.

North China's key steel-producing provinces such as Hebei, Tianjin, Shandong and Shanxi have all imposed curbs this week as Beijing is keen to ensure blue skies during the 1-7 October events.

Tangshan has followed its three-tiered system for classifying mills to enforce the restrictions. A-category steel mills, which have the best emissions controls, have been told to take "initiatives to reduce emissions" but not been given any specific production cut targets. B-category mills will have to shut down sintering and pelletising production completely, while C-category mills will also have to fully suspend sintering and pelletising and suspend at least 50pc of blast furnace operations.

During the November 2018-March 2019 winter restrictions in Tangshan, one mill was graded as A, 22 mills were put in the B category, nine mills in C and three were given a D grade. The number of mills in the A category has likely increased since then as Hebei province has pushed aggressively for mills to adopt ultra-low emissions regulations. There is no clarity on whether C-category mills have absorbed D-category mills within itself or if the lowest performing mills have upgraded themselves.

Electric-arc furnace-based mills and re-rolling mills have been asked to suspend operations completely from 24 September.

Apart from production restrictions, the three Tangshan area ports of Jingtang, Caofeidian and Huanghua will not allow truck transportation of iron ore during 22-27 September severely restricting portside trades of iron ore.

A Tangshan-based mill manager said its mill has shut down sintering production after receiving the official notice. Some small-size iron ore mines in Tangshan were also asked to halt production, he added.

"Portside prices in Tangshan are not likely to drop a lot as stocks of mainstream iron ore are tight at the city's ports. Some large-size trading firms have already been landing iron ore at other ports in anticipation of transport restrictions in Tangshan ports," said the manager of a Tangshan-based mill.

The restrictions are largely expected to support steel prices by squeezing supplies, although iron ore prices may be pressured by lower short-term demand from mills. But trading firms may not offer much discounts on seaborne iron ore cargoes on expectations of robust October demand.