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IMPACT ON 2020-21 WINTER PRODUCTION CUTS
Oct 19, 2020 11:34CST
Source: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a notice on October 16, urging enterprises to cut production, as well as reducing excess capacity and eliminating outdated capacity,in order to combat air pollution across the Yangtze River Delta Region (Jiangsu, Zhejiang, Anhui provinces) during the autumn and winter season of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.

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a notice on October 16, urging enterprises to cut production, as well as reducing excess capacity and eliminating outdated capacity,in order to combat air pollution across the Yangtze River Delta Region (Jiangsu, Zhejiang, Anhui provinces) during the autumn and winter season of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. 

 

 

 

 

 

 

Winter production cuts
Copper
Aluminium
Lead
Nickel
Zinc
Steel

For queries, please contact Frank LIU at liuxiaolei@smm.cn

For more information on how to access our research reports, please email service.en@smm.cn

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