China's Hebei Province to undertake Output Curbs before National Day Holidays

According to market sources, China's largest steel producing province, Hebei has announced suspension of around 3 MnT per year of steelmaking capacity in the ongoing month of September ahead of National Day celebrations on 1 Oct'19.

The country intends to have clearer skies before the National Day which has made Hebei to announce output curbs. The two key steel producing cities of Hebei province, Handan and Tangshan plans to have output curbs of 2.9 MnT in September, up by 5.5% against September 2018. Last year, Tangshan did not implement any production restrictions in the month of September.

While on one hand, Handan's pig iron capacity suspension in September will total 1.18 MnT, which will reduce the utilization rate of local blast furnaces to 54% in September from 64% in August, Tangshan will strengthen steel output cuts only over September 28 to October 4, reducing its blast furnace utilization rate to 81% from 85% over September 1-27 and 84% in August.

More than 30 steel mills in Tangshan have been asked to cut operations throughout the month. From Sept. 1 to 27, sintering operations at mills will be cut between 20% and 50% and blast furnaces by 30%. A sintering plant uses heat to process iron ore ahead of smelting into steel.

However, this output cut of 3 MnT by Hebei province is likely to have very limited impact given China's huge steel production capacity of 1.2 billion per year. Moreover, steel mills in other regions are expected to ramp up production in September in tandem with recovering seasonal demand, which will offset lower volumes from Hebei. According to the market sources, Chinese steel prices will resume an upward trend in September on better demand, but price rises might be limited due to the higher production.