SHANGHAI, Jun 24 (SMM) – Thirty-four steel mills in Tangshan will face intensified production curbs till the end of July, as the top steelmaking city in China extended cuts on local steelmakers for better air quality. Steel prices rallied on Monday June 24 after the release of the decision over the weekend.
Strict implementation of the cutbacks is expected to affect production of pig iron by 3.85 million mt, crude steel by 4.08 million mt, and disrupt demand for iron ore by 6.62 million mt, SMM assessed.
The curbs will also impact the local monthly capacity of steel plates by almost 2 million mt, and the monthly capacity of rebar and wire rods by 1.3 million mt. SMM learned that steel plate products accounted for about 30% of the total affected capacity across local steel mills, and rebar and wire rods took up more than 20%.
Prices of common steel billet in Tangshan extended their increase by 50 yuan/mt, to stand at 3,580 yuan/mt as of Monday June 24, after they gained 70 yuan/mt over the weekend, bolstered by news that Tangshan government held a meeting on environmental protection on June 22.
At closing on Monday June 24, the most-traded rebar contract on the Shanghai Futures Exchange jumped 2.31% on the day to close at 3,904 yuan/mt, with a top of 3,966 yuan/mt, the highest after the Chinese New Year holiday.
The most-traded SHFE hot-rolled coil contract also hit the highest post-CNY, at 3,928 yuan/mt, ending 3.69% higher on the day at 3,846 yuan/mt.
SMM expects steel prices to rally further as supplies shrink and demand fails to decline considerably.
As of Monday June 24, spot prices of rebar expanded by 30-90 yuan/mt from last Friday, with the national average price rising 62.3 yuan/mt on the week. Prices of spot hot-rolled coil advanced 50-100 yuan/mt across domestic markets, from levels last Friday.
An SMM survey found that a steelmaker in Lunan district of Tangshan currently runs two out of five blast furnaces, which is expected to affect 20% of the normal production of molten iron (14,000 mt/day), and impact 20% of the output of medium thick steel plate.
SMM also learned that production cuts on steelmakers in Fengnan district started today, as a mill is shutting down a blast furnace of 1,080 m³. The closure is expected to affect the output of molten iron by 3,000 mt/day and impact sintering capacity totalling 7,000-8,000 mt.
A steel plant in Zunhua district halved its capacity with two blast furnaces closed, and a producer in Caofeidian district shuttered one out of three blast furnaces, with plans of further cutbacks.
Tangshan's move came after the recent intensification of anti-smog measures in Wu’an of Hebei province, Lvliang of Shanxi, and Anyang of Henan. But steelmakers in Anyang were only ordered to cut sintering capacity, which means that producers could procure lump, pellet ore to maintain steel production.
