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North China heavy smog clouds steel operations

Posted on 12 March 2021

Steel mills in North China are having a tough time now, as they, widely acknowledged as a core source of air pollution, have been under the close scrutiny by the local authorities because of poor air quality forecast, and those in Tangshan are imposed the harshest measures since 2017, the first year of winter restriction, due to the local mills’ cheating during the curbing in early March.

The latest air-quality forecast from China’s Ministry of Ecology and Environment (MEE) on March 11 warned that many parts of China including provinces in North, Northeast and East China such as Hebei, Liaoning, and Shandong may continue be faced with poor air quality in the coming days, which is partly natural because of the weather as well as due to the recent booming industrial activities.

Among the polluting sources, Beijing named steel and coke industries in the Beijing-Tianjin-Hebei region and surrounding areas, and a new round of curbing, unsurprisingly, has been imposed on many steel mills in the abovementioned areas with those in Tangshan and Hebei province in general at the core of the attention and thus with the harshest measures, Mysteel Global understood from the market sources.

The most stringent control over the steel mills in Tangshan was a consequence that four local mills were discovered to have failed adhering to the ongoing control measures when Huang Runqiu, the head of MEE, went to Tangshan on March 10 for a sudden on-spot check on the local authority’s efforts in curtailing pollution, Mysteel Global understood from a MEE post on March 11.

Tangshan mills caught red-handed, harshest measures imposed

The MEE minister visited four Tangshan steelmakers - Tangsteel Stainless Steel Co, Tangshan Jinma Steel Group, Tangshan Chunxing Specialty Steel Co, and Tangshan Donghua Steel Co.

The on-site inspection showed that despite the official announcement that Tangshan had already triggered the Level 2 curbing measures since March 7 including restricting steel mills’ sinter machines, converters and trucking, “all of the four companies are still running at high capacities over the period, taking no requested emission reduction measures, even forging production records,” MEE criticised in the post.

“Some local mills had been found to even tip one another off and try to delete production records,” the ministry spelled out the few illegal acts.

The MEE ambush also led to the downgrading of nine steel mills and 11 coke makers in their environmental-protection efforts due to their high capacity utilizations, totally ignoring the governments’ curbing measures, according to the notice released by Tangshan’s Ecology and Environment Bureau on its website on March 11.

Since Beijing has been reiterating its stance on pollution control and executed a series of measures since 2016, fewer falsifying cases in the polluting industries have been uncovered, and the latest incidents in Tangshan, however, has raised the alarm level of the Chinese government, and many steel mills in Tangshan have immediately felt the ripple effect, Mysteel Global noted.

Mysteel’s latest survey on the capacity utilization rate of 126 blast furnaces in Tangshan, slumped substantially since the 75.4% on March 4 to 53.9% as of March 11, and seven of the nine that have been downgraded have been requested to suspend all of their blast furnaces immediately as they scored the lowest marks in environmental protection efforts.

Steel producers in Tangshan confirmed that they have been dealing with the chilliest treatment from MEE since March 11, and they have rushed into shutting down all those problematic facilities including blast furnaces, Mysteel Global noted.

“We just banked two more blast furnaces this morning, and I heard that the other mills are taking similar action,” an official from a Tangshan steel mill shared on March 12, admitting that the mill’s steel sales have been on hold because of the facilities’ suspension.

“This is probably the severest curbs ever, even harsher than in the 2017-2018 winter when Beijing requested for a universal 50% capacity trimming among all of our blast furnaces,” he added.

China’s spot steel prices jerked up to the sudden widespread production cuts among the Tangshan mills, and by the morning of March 11, the local Q235 150mm square billet price soared Yuan 140/tonne ($21.5/t) on day to Yuan 4,430/t EXW and including the 13% VAT, or a new high since September 2011.

On March 11, Mysteel SEADEX 62% Australian Fines stood at $170.75/dmt CFR Qingdao, up by $6.75/dmt on day, largely following the jump in steel prices.

It is still hard to predict the long-term impact of the latest happening in Tangshan, though the fundamentals may lead to further price strengthening in the longer term as spot demand has picked up and steel inventories at both the mills and traders have headed downward, as reported.

Source : Mysteel Global