Chinese steel mills will restrict production in the first quarter of next year to ensure air quality during the Beijing Winter Olympics. At the same time, power cuts in some provinces have caused southern China’s steel mills to reduce production.
Kallanish learns from market sources that restrictions will hit all heavy industrial enterprises in Huabei, Huaibei, and West China, especially Tangshan, Tianjin, Shijiazhuang, Zhangjiakou, Chengde, Shandong, Jinan, Weihai, Weifang, Taiyuan, Datong, Changzhi, Luoyang and Zhengzhou. These will need to suspend or restrict production from 1 January to 8 March 2022. There is no official document to announce the details of the production limit, however.
Individual cities in Shandong have issued policies that require companies with an environmental rating of C grade or below to suspend production completely during most of this production restriction period. Although Tangshan did not announce a similar policy, the Tangshan government adjusted ten grade D steel companies to grade C on Monday.
The central government requires that crude steel production be kept unchanged this year, and this goal is expected to be easily completed in most provinces. Therefore, after getting rid of production restrictions for the purpose of controlling this year’s output, steel mills are expected to increase production to supply restocking demand before the Spring Festival. This is expected to bring around 3 million tonnes of additional production in December, according to Huatai Futures.
Regional production restrictions are also continuing through winter due to power supply issues. Market reports indicate that electric arc furnace steel mills in Heyuan, Guangdong have almost completely stopped production and will restart in early January 2022. The reason for the shutdown is local energy consumption control requirements.
By Kallanish Team