Steel prices in China are likely to remain firm as China looks to reduce the output of steel and aluminum to achieve carbon neutrality by 2060. With the announcement of additional production cuts coupled with the existing winter output restrictions, steel futures rose and gave spot metal prices a boost. Despite high inventories of finished steel, the output cuts are likely to balance supply.
Stricter control at Tangshan
On March 2, Tangshan, China’s largest steelmaking hub with 145mn mt output has officially announced ten measures to reduce pollutants in March. This would lead to strict production cuts by local steelmakers in Tangshan. The city will also reduce the number of trucks allowed for transportation by 50pc than the present.
Production at seven blast furnaces installed at four steelmakers including Yanshan Iron and Steel, Tangshan Stainless Steel, Huaxi Steel, and Rongxing Steel will be shut completely before March 10. The equipment at Xinbaotai Steel will also remain shut.
Overall pollutants’ discharge in Tangshan for March will be cut to 45pc of the average amount in January and February this year.
Tangshan government said that it has planned to extend the implementation volume controls gradually to coking, cement, power, and the foundry industry as well. The government is likely to shut five coke ovens at Jianlong Coke and Lugang Coke after the heating season.
The local government plans to reduce emissions, including carbon emissions, by more than 40pc from 2020 levels. This means steel companies’ annual steel capacity will decrease by least 50mn mt, according to Beijing Lange Steel Information Research Center.
In 2020, the city had ranked fourth from the bottom in the list of 168 cities which required pollution control drive. The city government aims to improve its environmental rankings to get out of at least the bottom 20 cities in 2021.
The measures which have been chalked out could lead to a production decrease by 5,000mt to 12,000mt per day of hot metal output.
Iron ore spot prices rebound to a nine-year high on Wednesday. Finished steel prices as stocking activities picked up. Australian iron ore fines 62pc Fe rose by $1.25/mt to $176.5/mt cfr Qingdao. Rebar futures and Tangshan billet jumped by CNY110-150/mt within a day.