Posted on 22 Mar 2022
The scope of China's efforts to contain the recent upsurge in COVID-19 cases has been expanding and Tangshan, the country's top steel city in North China's Hebei province, is inevitably being impacted. Local steel mills face logistics headaches because restrictions on transportation by road are disrupting deliveries while operations at many steel re-rollers have already been suspended, according to Mysteel's surveys.
The recent COVID-19 wave swept initially through Hong Kong in February before spreading to other regions and provinces in China. On March 19, health authorities in Tangshan – a city of 7.6 million people throughout six main urban districts – reported identifying their first seven cases of this latest wave, followed by another two on March 20. The city government acted swiftly to head off any escalation, including imposing immediate lockdowns and mandating city-wide nucleic acid tests, according to official announcements.
A steel industry source in the city says the local authorities moved with considerable vigor. "When the lockdown order was issued on Saturday, we were quarantined wherever we were at the time – at work or at home – and roadblocks were hastily erected to prevent any vehicles from driving on the roads apart from police cars and ambulances." she said.
"It is a complete and all-encompassing lockdown," she concluded.
Tangshan is China's top steel production base, with the city's steel production accounting for over 12.6% of the country's total last year or more than 131 million tonnes The city's over 30 steel mills and over 50 steel re-rollers mainly supply section steel, steel strips and hot-rolled coil across China.
The swiftness with which the restrictions were introduced and the strictness with which they are being policed have had an immediate impact on local steel mills and steel re-rollers, Mysteel Global understands from local sources.
"Truck transportation of all raw materials – from iron ore and scrap to coal and ferroalloys – has been disrupted due to the epidemic control measures," an official with a Tangshan-based steelmaker said.
At the moment, his company is able to maintain normal operations by drawing down the raw materials stocks in its yards, but the future looks uncertain, he admitted. "If the control measures remain in place for a long time – say, more than eight days – we might need to adjust our production plans," he added.
Though Mysteel's survey across 19 mills in Tangshan region showed that as of March 20, all were maintaining normal operations, four of those canvassed said they may need to hot idle blast furnaces sometime soon due to low raw material stocks. Indeed, one mill had already hot idled a blast furnace on March 21 due to a lack of coke, one source said.
As of March 20, most of the 19 mills had sufficient iron ore stocks for 7-12 days of consumption, though some claimed their ore stocks could only last them for 3-5 days, the survey showed.
"It is unclear how long the lockdown will last, as the cases are scattered in different regions throughout the city and 'patient zero' (the person identified as the first to become infected in Tangshan's outbreak) has yet to be found," a local market watcher commented.
Moreover, key staff working on production lines are being quarantined at their work sites, so as not to risk catching the contagion outside, to ensure that steel mills still have enough experienced line workers to maintain operations, according to mill sources.
This is not the case among steel re-rollers, the surveys found, as their operations have mostly been suspended and workers allowed returning home for quarantine.
Mysteel's survey across local steel re-rollers rolling sections showed that within days of the local government initiating its rough containment response, their capacity utilization rate fell to only around 50% as of March 19 from 76% on March 17. Survey respondents suggested it could decline further to under 10% in the coming few days.
Source:Mysteel Global
