China’s top steel-producing cities are feeling the impact of strict environmental regulations

China has resorted to stricter environmental rules to combat severe steel overcapacity. This depreciated prices and affected a large part of the steel sector.

Tangshan, which is 200 km (124 miles) east of Beijing and produces more steel a year than the United States, has been at the forefront of campaigns to reduce smog and tackle overcapacity.

The city has pledged to reduce its annual production of crude steel by 28 million tons from 2013 to 2017, about a fifth of the total produced. That’s why steel companies are now forced to undergo expensive upgrades.

Severe steel overcapacity reduces production in factories

„There are so many factories that are forced to reduce or stop production.” Said Zhou Junjia, sales manager at Baifeng Iron and Steel Corporation. Also, mentioning that four private steel companies, nearby, were recently forced to close.

“In Tangshan, there are too many companies selling steel products. I traveled around to customers and big steel markets in other big cities and nobody is buying,” added Zhou.

Baifeng has reduced crude steel production/day by 40 percent to 1,200 tons in recent months. Which would be equivalent to an annual reduction of 292,000 tons.

Tangshan, located in Hebei province, forces industrial companies – including steel mills – to renew their equipment in the next few months. Aiming to meet the new strict pollution standards.

Steel mills around Beijing will also have to reduce production between August 20 and September 3. To help with air quality and because the city is commemorating 70 years since the end of the second world war.

The expertise published by the Metallurgical Industry Association

According to an expertise published by the Metallurgical Industry Association of Hebei Province, 26 furnaces in Tangshan have been closed since July for revisions. And a large part of the steel processing factories in Hebei. They have either stopped or halved production due to persistently low prices and environmental regulations.

The discounts are already having an impact on local steel prices in Tangshan. Being up by 12.6% to 1880 yuan per ton. After hitting a low of 1,670 yuan on July 8, according to data provider Mysteel.

Xue Heping, an analyst at the China Iron and Steel Association (CISA), warned against „blind optimism” but said in a report that „the toughest period for the steel market is already passing.”

However, prices in Tangshan remain more than 12 percent lower than at the beginning of the year and 30 percent lower than in August 2014.

Article source:

http://www.businessinsider.com/chinas-top-steel-producing-city-is-feeling-the-impact-of-strict-environmental-regulations-2015-8