SHANGHAI, Oct 19 (SMM)—The Ministry of Ecology and Environment has issued a notice on October 16, urging enterprises to cut production, as well as reducing excess capacity and eliminating outdated capacity,in order to combat air pollution across the Yangtze River Delta Region (Jiangsu, Zhejiang, Anhui provinces) during the autumn and winter season of 2020-2021.
It is understood that 85 cities in Shanghai, Nanjing, Wuxi, Hangzhou, Ningbo and Hefei will be affected. The duration of the production cuts varies across different sectors, and is expected to last around 6 months till March 2021.
Industries that are impacted from the production curbs include iron and steel, building materials, nonferrous metals, coking, casting, petrochemicals, chemicals, packaging and printing, and industrial coating.
In this special report we present you our analysts survey on the production cuts across the China Metals industry in this region and others.
Key Industries that are affected by the autumn-winter production curbs
Alumina
Aluminum
Auto manufacturing
Blast furnace steel mills
Brick kilns
Carbon
Carbon black manufacturing
Cellulose ether
Cement
Ceramics
Coal-based nitrogen fertilizer
Coating manufacturing
Coking
Copper smelting
Electric-arc furnace (EAF) mills
Engineering machinery manufacturing
Ferroalloy
Furniture manufacturing
Glass
Glass steel (fibre reinforced plastic products)
Industrial coating
Ink manufacturing
Lead smelting
Lime kiln casting
Molybdenum smelting
Non-ferrous metal rolling
Packaging and printing
Pesticide manufacturing
Petrochemicals
Pharmaceuticals
Plastic artificial leather and synthetic leather manufacturing
Refractory materials
Rock mineral wool
Rubber products manufacturing
Secondary copper
Shoe manufacturing
Waterproof building materials manufacturing & refining
Wood-based panels manufacturing
Zinc smelting
Ferrous
Steel
Steel production cuts at Tangshan’s for autumn-winter season 2020-2021
Tangshan, China‘s largest steel-producing city, has imposed sintering and blast furnaces restrictions for the autumn-winter season of 2020-2021.
The output restrictions run from October 1 to March 31, 2021, according to a city government notice issued on October 10. According to the documents, production will be curbed and limited according to a ratio ranging from 10% to 45%. It is understood that 20 mills have been upgraded since last winter, while 10 steel mills are ungraded as they will be undergoing relocation.
Source: SMM
Summary
Restriction on pig iron capacity in 2020-2021 totalled 9.6 million mt (excluding relocation), lower than the autumn-winter period in 2019-2020. The effectiveness of output restriction was less than 50% last year. It is understood that new policies have yet to be issued and production cuts were based on notices released during the holiday period. Thus, the impact of restriction in Tangshan is limited. Steel products prices are likely to be dampened.
Shanghai:
1. Ultra-low emission transformation: Complete the ultra-low emission transformation of the three 600m2 sintering machines and 5.53 million mt of coke capacity at Baowu Group.
2. Industrial structure adjustment: Complete the adjustment and upgrading of enterprises involved in the "Optimization" Action Implementation Plan (2018-2020), and complete no less than 700 industrial structure adjustment tasks in the city.
Jiangsu Province:
1. Ultra-low emission transformation: Complete 90 million mt of ultra-low emission transformation.
2. Industrial restructuring: Complete withdrawal or relocation of all smelting capacities within 10 kilometers of Taihu Lake, 600 m³ blast furnaces and 50 mt or less EAFs within 20 kilometers of the lake, and chemical companies within 1 km on both sides of the main and tributary streams of the Yangtze River that are not in the chemical park.
Zhejiang Province:
1. Ultra-low emission transformation: Complete 5.6 million mt of ultra-low emission transformation.
2. Industrial restructuring: Complete the comprehensive renovation of 100 key industrial parks.
Anhui Province:
1. Ultra-low emission transformation: Complete ultra-low emission transformation of 6.7 million mt of crude steel production capacity.
2. Industrial restructuring: Intensify the renovation of existing chemical parks, and promote relocation of a number of heavily-polluting enterprises such as producers of cement, flat glass, coking, and chemical industries.
According to the SMM survey, steel mills in the Yangtze River Delta region have basically completed ultra-low emission transformation, so this environmental protection program has limited impact on steel mill production.
Source: SMM
Downstream: At present, there are no signs of implementation in steel mills and logistics, and construction sites are also in peak construction season. The market has not paid much attention to this document, and the substantial impact has not yet been reflected. In 2019/20 winter the affect on steel supply was reduced versus the previous year, while the effect on demand and especially logistics was more noticeable. With many mills achieving higher environmental standards this year, again it seems the impact on supply will be less than a year ago, so the key question for steel markets is how much disruption will be seen to demand and logistics, so overall the winter season likely adds more downside risk to steel prices and may cause production cuts due to demand loss and negative margins rather than stringent environmental controls.
Non-ferrous
Aluminium
Summary
The expected impact of the production restriction in the winter season is relatively limited. The main reason is that after several rounds of environmental protection reforms, most companies have met the emission requirements, and only the carbon anode industry has a rigid production restriction requirement. The impact is concentrated on the production capacity of aluminium and alumina. If pollution becomes worse on a temporary/weather related basis, adjustments on the production restriction may happen in the future.
Production restrictions are most serious in Henan, but even here still with relatively limited impact.
In terms of transportation, at present, there are restrictions on cars under the national level 5 in Hebei near Beijing and some regions in Jiangsu, but aluminium supply chain freight has not been affected.
For more infromation, please download the report here.
