Rumours on capacity cuts in Tangshan continue, but doubts remain

Rumours about a steel output cut in northern China’s Tangshan city have re-emerged following local media reports about a timetable for capacity cuts in Hebei province, where it is located.

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A total of 60 million tpy of steel capacity will be phased out in Hebei by the end of 2017 and another 26 million tpy by 2020, according to local media reports on Tuesday August 20 regarding upcoming guidelines to control air pollution in the province.

However, the reports had little impact on the spot steel market as no there was official announcement and no details have been confirmed yet, according to market sources.

“If this is true, I’m happy that the government is getting serious about pollution control and capacity control of the steel industry. But it could be very difficult for measures to be carried out as this also means a sharp decrease in local tax revenue and employment,” a Beijing-based analyst said.

Just several days ago, mills in Tangshan – the country’s steelmaking hub – were rumoured to have been urged by the local government to make yearly cuts of iron output by 28 million tpy and of steel output by 32 million tpy.

But as no official instructions have been issued, most market participants thought little of the rumour.

“There have been several rounds of rumours regarding production cuts in Hebei since the beginning of this year, but no actual measures have been taken so far,” a Tangshan-based mill source said.

His mill has no plans to cut production in the short term given the firm domestic market and satisfactory orders. Neighbouring mills’ operations have not been affected either, he added.

Tangshan’s blast furnace utilisation rate was 94.65% as at August 15, up 0.46% week-on-week, according to market sources.