Tangshan tells steel mills to get serious on pollution

The local government of China's largest steel-producing city Tangshan has described the city's pollution situation as "grim", telling producers to implement production restrictions, as it reprimanded several companies for not meeting such restrictions in the autumn-winter season.

The renewed focus on emissions control in Tangshan has driven prices of iron ore and billet lower, as a strict implementation of restrictions and additional curbs on steel production may drive down demand for steel feedstocks.

"Enterprises should recognise the current grim situation, take the initiative to fulfil the main responsibilities of pollution control and emissions reduction," the city government said.

The Tangshan government also summoned yesterday executives of several heavy industrial enterprises and complained about their companies not fulfilling their obligations on steel production restrictions and emissions control in the autumn-winter months over October 2018-March 2019. The companies summoned included the city's largest producer Hesteel.

Other steel producers summoned include Tangshan Songting Iron and Steel, Hebei Rongxin Iron and Steel, Qian'an Iron and Steel, Hebei Xinda Iron and Steel, Tangshan Ruifeng Iron and Steel, Tangshan Donghua Iron and Steel, Kaiheng Iron and Steel and Tangshan Yifeng Iron and Steel.

The city government has pledged to take "decisive measures to reverse the current passive situation" regarding emissions control.

Tangshan had earlier divided the city into two group of counties, enforcing sintering, pelletising and steel output curbs in alternate months for each group in the June-September period.

Market participants have reported additional sintering curbs of 50pc on some counties and companies during 16-30 June. Rolling mills have been asked to indefinitely stop operating in the Fengrun district from 13 June, where most such mills are located, a decision that led to an 100 yuan/t ($14.50/t) drop in billet prices yesterday. Billet is the key feedstock for rolling mills.

Iron ore prices are unlikely to be pressured for long by Tangshan's pollution focus unless severe restrictions are imposed on blast furnace operations, which seem unlikely. But if such restrictions lead to lower steel output and higher prices, it could add to the bullish sentiment for iron ore. The sintering and pelletising curbs, if strictly implemented, will support demand for imported pellet and lump in the short term.