China's Hebei records 25 mn t drop in steel output in 2021; curbs to stay in 2022

Downsizing of crude steel production is an integral aspect of China's decarbonisation drive. China's top steelmaking province of Hebei witnessed the sharpest decline in production in 2021 that comprised around 80% of the country's total crude steel output reduction in the year gone by.

Data provided by the National Bureau of Statistics (NBS) reveals that the country's crude steel output will decrease by 3% year-on-year to 1.033 billion tonnes (bn t) in 2021 from 1.065 bn t in 2020.

The country's winter production cuts announced in Sept'21 will be implemented in Beijing, Tianjin and the provinces of Hebei, Shanxi, Shandong and Henan till 15 Mar'22. Mills will be required to restrict production by no less than 30% compared to the same period last year

Crude steel production is carried out in 28 regions of the country's 31 provinces, autonomous regions and municipalities, of which a majority of regions achieved a y-o-y reduction in crude steel output. On an annual basis, the total reduction in China's crude steel production stood at 31.9792 million tonnes (mn t).

Sharp cuts in Hebei

From the perspective of absolute y-o-y decline in output, the country's top steelmaking province of Hebei achieved the sharpest reduction. Total reduction in output from Hebei in 2021 was recorded at 24.805 mn t, accounting for 77.57% of the China's total output curtailment.

Notably, Hebei province in North China has continued to reduce excess capacity with the number of steel production enterprises reduced from 107 to 68, and steel production capacity reduced from a peak of 320 mn t earlier to less than 200 mn t at present.

From the relative perspective of downsizing of steel production, the reduction in Tianjin was the steepest, reaching 15.96%, followed by the reduction in Hebei at 9.93%. Output reduction in Henan and Guangdong also exceeded 6% each.

Capping iron ore prices

Looking back on 2021, the reduction of crude steel output in the steel industry has achieved remarkable results, mainly reflected in the fact that the rapid surge in seaborne iron ore prices has been effectively curbed.

This has enabled China's steel industry to achieve the best benefits in history, effectively accelerating transformation and technological upgrading of the industry as well as hastening consolidation by facilitating mergers and reorganisations.

According to a recent report, recent mergers and acquisition transactions have raised the share of China's top five steelmakers from 26% to 30% of the country's total steel production. Consolidation, driven by the leading steel producers, is already helping the steel industry meet the targets of cutting steel production, capping iron ore prices and reducing carbon emissions.

Production curbs to continue

Considering the continuity and stability of China's regulatory policy in the medium to long term, it seems that it is still necessary for the industry to continue to regulate crude steel output in 2022.

Carrying out crude steel output reduction is not only expected to enable the steel industry to further deepen the supply side structural reforms but also consolidate the results of the reduction of crude steel output in 2021.