Off-peak Production Scheme in the Steel Industry During the Heating Season in 2021-2022

SHANGHAI, Jan 24 (SMM) - Recently, Tangshan City has initially formulated a plan for off-peak production in the steel industry during the heating season in 2021-2022. The Plan puts forward a series of requirements for the production of local steel companies in the first quarter of 2022. The iron and steel smelting enterprises, enterprises with an A-level environmental performance rating, and all-scrap EAF mills that have completed ultra-low emission transformation could take emission reduction measures independently, but must ensure that crude steel output does not increase year-on-year during the off-peak production period.

This round of off-peak production is divided into two stages, the first stage is from November 15, 2021 to December 31, 2021, and the second stage is from January 1, 2022 to March 15, 2022. In principle, the ratio of off-peak production of iron and steel enterprises shall not be less than 30% of the crude steel output of the same period of the previous year. Off-peak production rules: B, B-, C, and D-level enterprises will adopt differentiated off-peak production ratios according to different environmental performance ratings. The lower the environmental performance rating is, the higher the off-peak production ratio will be. The assessment as of October 10, 2021 shall prevail.

According to SMM calculations, the Plan involves 23 steel mills, and it plans to reduce crude steel output by around 8.91 million mt. The off-peak production will be implemented from January 1, 2022 to March 13, 2022, and the centralised production cuts will happen during January 30-February 20 (Winter Olympics), March 3-March 13 (Winter Paralympics). According to SMM statistics, under the requirements of the off-peak production document, the output will be affected in 4 stages.

①From January 1 to January 29, 2022, the average daily crude steel output affected is 69,000 mt;

②From January 30 to February 20, 2022, the daily average crude steel output affected is 190,000 mt;

③ From February 21 to March 2, 2022, the daily average crude steel output affected is 67,500 mt;

④From March 3 to March 15, 2022, the daily average crude steel output affected is 180,000 mt.

On the whole, under the requirements of the Plan in the first quarter of 2022, the total crude steel output in Tangshan City will be reduced by around 8.91 million mt, with an average daily reduction of 99,000 mt. The production restriction is close to 30% of the output in the same period of the previous year (the crude steel output in Tangshan City from January to March 2021 was 32.44 million mt. If the output shall be reduced by 30% in Q1 2022, crude steel output in January-March 2022 should be down 9.732 million mt). The timing and intensity of the production restriction of steel mills are required to be precise, and the impact is slightly lower than market expectations.