China's Tangshan and Handan City to Continue Production Cuts from Apr to Jun'19

With the end of winter heating season in March, Steelmakers in China's largest steel producing city Tangshan and another city Handan will be required to continue the production cuts for second quarter starting from April till June 2019 as a part of local government's efforts to improve air quality.

While during winter heating season from Nov'18 to Mar'19, the steel mills in both the cities were required to cut 30% of their blast furnace output, during non-heating season in Q2, the production cut will be about 20%.

According to the market sources, steel mills in Tangshan will be divided into three regions and each region will take turns curbing output and based on the estimates, the average production cuts would be around 20% throughout April to June. However, it is unlikely that production restrictions will continue in the third quarter from Jul - Sep'19.

Industrial emissions are a major source of air pollution. Local governments in smog-prone northern China have ordered factories during the past two years to cut output during the northern hemisphere winter to meet air quality targets set by Beijing.

In Mar'19, Hebei which is China's top steelmaking province announced its target to cut 14 MnT of annual steelmaking capacity over the next two years 2019 and 2020 as an effort to improve air quality. The province which is home to major steel hubs such as Tangshan and Handan, produced more than a quarter of last year's output in China, the world's biggest steelmaker. According to National Bureau of Statistics, Hebei province produced around 237 MnT of crude steel in 2018.

Hebei's average PM 2.5 concentration in 2018 was 56 micrograms, according to government air quality data. The annual average was down 13% year-on-year but still well above a national reading of 39 micrograms.