Tangshan places curbs on steel production

China's largest steel-producing city Tangshan has asked several steel producers to indefinitely suspend iron ore sintering and partially reduce steel output from tomorrow, as the city declared a level 2 pollution emergency.

Tangshan in north China's Hebei province said mills graded B in emissions compliance by the city government have to suspend sintering and pelletising but can continue normal steel production. Mills with a C grade have to additionally reduce total steel output by 50pc, which will involve shutting down some of the blast furnaces at these mills.

The latest document does not list mills in A, B and C grades. But a previous notice on production restrictions in October had put only one mill Shougang Qian'an as grade A, two mills Shougang Jingtang and Sinogiant as grade B, while other mills in the city were graded C. The numbers of mills in each grade may have changed since then.

Mills, which also provide heating to other enterprises apart from steel production, will be allowed to operate some of their sintering and pelletising facilities.

While the city government did not mention any end date for the steel sector restrictions, it said that traffic restrictions in the city will be imposed until 19 December.

The entire province of Hebei has imposed level 2 pollution restrictions from tomorrow, so it is likely that other key steel-producing cities in the province, such as Handan, may impose restrictions similar to that in Tangshan.

These restrictions will squeeze steel supplies and add to the already bullish trend in steel prices. Iron ore prices are also likely to follow the uptrend in steel prices. But gains in fines prices may be curbed by the sintering restrictions, which will encourage mills to buy more imported pellet and lump in the portside markets. The Argus 64pc Fe cfr China weekly pellet assessment had increased by $5/dry metric tonne (dmt) to $114/dmt on 10 December.