Steel production could be hit in China in the coming days with the Ministry of Ecology and Environment (MEE) proposing autumn-winter steel production restrictions in the northern region. These restrictions would come into effect on Oct 1 and last until March 31, 2021.
Steel mills in Beijing, Tianjin, Hebei, Shandong, Henan, Shanxi, and Shaanxi are likely to be affected by production restrictions as they adhere to emission standards. The ministry has pointed out that the 2020-2021 winter is crucial for Beijing to meet the set targets for air quality improvement as per its 13th five-year year plan ending in 2020.
Restrictions will be executed in two phases, with the first phase spanning across October-December, and the second from Jan-March 2021.
The ministry plans to maintain PM2.5 concentration at acceptable levels and has capped annual capacities at 110mn mt in Hebei, 12mn mt in Tianjin, 40mn mt in Shandong, 13mn mt in Henan, 20mn mt at Shanxi at 20mn mt, and 6mn mt in Shaanxi. The government has also capped capacity to 200mn mt for the country’s leading steelmaking province Hebei. In Tangshan and Tianjin, production cannot exceed 100mn mt and 15mn mt, respectively, states the proposal.
The ministry has divided steel mills into three grades – A, B, and C and with different measures for each grade. Steel mills with B and C grade need to cut production as per the government’s instructions.
Production is likely to lower amid such restriction. For instance, Hebei’s output can fall from the monthly average of 19.17mn mt. This could hamper the domestic supply of billets increasing imports of billets again into China. In the domestic market, Chinese billet prices stand at CNY3,330/mt ($484/mt) ex-Tangshan.
According to China Iron & Steel Association (CISA), stock of finished steel stand at 13.4mn mt as of Sept 20, 3.87mn mt higher than early 2020.