Tangshan announces less Stringent Output Cuts for Steel Mills this December

China's largest steel producing city, Tangshan has announced production curbs for December month which are looser as against previous winters of 2018.

As per the new notification released, the city government has exempted steel mills that have been graded A and B for emissions policy compliance from any steel and sintering output restrictions in December. Although the extent of output cuts for mills in grade C has not been specified, they will have to comply to output restrictions, equivalent to those enforced when a level II pollution alert is sounded. The latest document however has not listed the names of mills under A, B, and C category. Also the production cuts for Jan and Feb'19 are still uncertain.

Last year Tangshan had adopted a four-tier system to control mill emissions during 1 Oct-31 Mar. Mills with grade A score got to operate without any cuts, tier B mills were told to cut blast furnace output by 30%, C-grade mills needed to make a 50% output cut and D-grade mills had to cut blast furnace output by 70% and completely suspend sintering.

According to the market participants, the intensity of production restriction measures will be looser in December which will boost output since most mills are making profits and have no compelling reason to rein in production.

Hebei province, which includes Tangshan city, is aiming for all steel mills to adhere to ultra-low emissions regulations by October next year, which will do away with the need for production restrictions completely from November 2020 onwards.

The output cuts in the other regions of China are also more relaxed against previous year. However, according to the policymakers, El Nino conditions forecast for this winter will be less conducive to dispersing pollution, adding pressure on pollution controls to offset the negative weather conditions. El Nino conditions increase the likelihood of windy weather. China was able to reduce PM2.5 emissions by 25% in the 2017-18 winter, aided by strong winds that accounted for a third of the reduction.