Blast furnaces in Tangshan city in northern China's Hebei province have been ordered to lower their steelmaking utilization rates to around 80% over September 28-October 4 to ensure clearer skies before China's National Day holiday.
Based on an announcement from the Tangshan local government this week, S&P Global Platts estimated Tangshan's overall blast furnace utilization rate will be 85.2% over September 1-27, slightly up from 84.5% in August. The utilization rate will be lowered to 80.6% during September 28-October 4 in a bid to improve air quality ahead of China's National Day celebrations.
Tangshan is expected to suspend about 55,700 mt/day of pig iron capacity while operating at the 85.2% utilization rate, and about 73,200 mt/day when at 80.6%.
In August, 58,600 mt/day of pig iron capacity was ordered to be suspended.
Tangshan will exempt 17 steel mills from the cuts over the whole period of September 1 to October 4 as their facilities have met environmental standards and are not so polluting.
The remaining 16 steel mills will be ordered to suspend 30% of their pig iron capacity at blast furnaces over September 1-27. During September 28-October 4, nine of the mills will increase the suspensions to 50%, while the rest will stay unchanged at 30%.
Some steel market participants said steel output cuts in the run up to National Day were lower than they expected. On the other hand, buying in the steel spot market largely improved September 2, indicating seasonal demand was picking up, they said.
Chinese steel prices are expected to start improving in September when the hot weather cools and construction activity enters its strong season. But a pickup in steel demand will also spur an increase in steel production that could in turn undermine any steel price rise.