BEIJING/MANILA (Reuters) - Production cuts ordered for this winter by China’s top steelmaking city Tangshan look less restrictive than last year, analysts said, potentially keeping output high even as the city seeks to fight pollution by cutting smokestack smog.
Based on a list of restrictions detailed in a local government notice issued late on Thursday, the average production cut at mills in the city would come to 30-35 percent, lower than last year’s 42 percent, analysts said.
Of the 36 steel producers in Tangshan, 22 were ordered to reduce output by around 30 percent and nine by 50 percent, according to the notice. Unlike last year, Beijing has allowed local governments to set their own output curbs this winter.
“From the reduction rate perspective, this year seems to be more lenient than last year,” said Zhao Yu, an analyst at Huatai Futures. “But it is still uncertain if absolute output from steel mills in Tangshan will be bigger (this winter), as the government did not say when exactly the production cuts will be enforced.”
Tangshan said the plan on output restrictions is open to a period of public consultation from Oct. 18-22.
A group of three mills, which failed to upgrade anti-pollution equipment and produce only low-end steel products, were told to slash output by 60 percent and shut down all sintering machines.
One company, Qian’an Iron and Steel, controlled by state-run Beijing Shougang Co Ltd, was exempted from the cuts, having complied with ultra-low emission standards
The city, located in northern Hebei province, issued the statement hours after Reuters reported on Thursday that steelmakers in Tangshan were ramping up output in the absence of precise orders on output curbs.
Last year, mills in Tangshan were ordered to implement winter curbs from Oct. 15, a month earlier than other cities in northern China.
Despite those restrictions, Tangshan’s crude steel output reached 91.2 million tonnes in 2017 - accounting for more than 10 percent of China’s total - up from 88.31 million tonnes in 2016.
“Supply should be less tight than last year, but demand condition is weaker this year, especially on the sheet side with the latest auto statistics worrying some market participants,” said Kevin Bai, steel analyst at CRU in Beijing.
China’s car sales fell the most in nearly seven years in September, stoking concerns the world’s biggest auto market could contract for the first time in decades this year amid cooling economic growth and a biting trade war.
Reporting by Muyu Xu in BEIJING and Manolo Serapio Jr. in MANILA; Editing by Kenneth Maxwell