According to Mining News Pro -The Ministry of Ecology and Environment issued the “Action Plan to Comprehensively contain and fight against Air Pollution in Beijing, Tianjin and Hebei and Surrounding Areas in the Autumn and winter of 2018-2019” to implement differentiated off-peak production, a solution that meant to avoid “one measure fits all” approach.
The following is a simple comparison of the production limit between year 2017 and 2018: this year, the electric furnace is clear from restriction.
| Official 2017-1018 VS Official 2018-2019 |
| Key point | 1. No production limit ratio and explicitly expressed short flow steelmaking free from production limit; 2. No mandatory construction halt; 3.Main target slightly above that of last year. |
| 2017-2018 official version on capacity limit in heating season | 2018-2019 official version on capacity limit in heating season |
| Regions need production limit | 2+26 cities | 2+26 cities |
| Ratio of limited capacity | Key cities such as Tangshan, Handan, An yang, Shi Jiazhuang limit capacity by 50% during heating season,based on blast furnace capacity and measured by actual power consumption volume; Electric furnace, gas furnace must stop production during days with yellow warning and upper level and coking time must be prolonged to above 36 hours, and those coking plants in residential neighbourhood must extend coking time to above 48 hours. | Differentiated off-peak production is applied to avoid "one measure fits all” approach. Each local government need to ensure compliance of off-peak production during heating season for high emission/discharge industries such as steel making, building materials,coking,foundry,non-ferrous metal and chemicals. Off-peak period is subject to be extended or shortened based on monthly air quality forecast during heating season. Enterprises must fully implement the off-peak production policy if they fails to discharge/emit pollutes as per criteria in a stable manner, meet the requirement of pollutant discharge permit, or complete the upgrade process as required by "comprehensive management of air quality in 2018-2019 Autumn-winter”. For those enterprises that fall in the restricted category of "Guidance on industry restructuring”, a higher limit ratio or shutdown will be implemented. Whereas those enterprises that have been apparently on the forefront of optimal discharge/emission, production limit will be exempted, including: compliance in organized discharge/emission, on-organized emission and bulk transportation pollution meet ultra-low criteria, application of electric furnace in short flow steelmaking; coke oven in closed cover; desulfuration and denitration equipment applied for coke oven flue gas and reached special limit as required; concentration of particulates and SO2 from foundry or melting equipments stably reach 20 and 100mg/M3 respectively (cupola must equipped with flue monitoring devices). |
| Production limit period | Nov.15,2017-Mar.15,2018 | Nov.15,2018-Mar.15,2019 |
| Construction halt | All road construction, hydro projects that related to movement of soil and demolition of houses must stop. Crucial projects that benefit civil livelihood or key projects may apply for operation. | None |
| Main targets | Average concentration of PM2.5 and heavy polluted days decrease by 15% respectively year-on-year. | Average concentration of PM2.5 and heavy polluted (above) days decrease by 3% respectively (the PM2.5 average concentration in Beijing-Tianjin-Hebei region last year dropped by 19.93% from previous year) |
Policy for the “disordered, undisciplined, polluting” enterprises: the relevant provinces (cities) will submit to the Ministry of Ecology and Environment a list of disqualified enterprises subject to being cleaned up and rectification before the end of September 2018. Before this deadline, all local authorities will complete a new round of identification of those disqualified enterprises and treat them by nature of category and in the principle of "shutdown before treatment". For those enterprises that must be close down, it is must to exercise the guidance of "two cut-offs and three removals" (cut off industrial water, electricity supply, removal of raw materials, products and production equipment); for those needing relocation or integration, the relevant approval procedures should be in accordance with the law; For those needing upgrade, deep rectification needs to be done in line with standard of advanced enterprises and production will only be allowed after approval of relevant departments.
This autumn-winter storm will put tremendous pressure on some disordered, undisciplined and polluting scrap processing sites, and will consequently have an impact on the collection and supply of steel scrap during the heating season.
At the same time, although the ratio of production limit is not regulated in the plan, the off-peak production will continue to be maintained anyway. As for the actual production limit, it depends on the final plan and implementation of each city. The production limit in Beijing-Tianjin-Hebei seems to be relaxed, but there is good news emerged in East China recently, which is only subject to be officially confirmed. All in all, how will the scrap market run at this stage?
Although the recent development of Future rebar and spot billet is not very optimistic, with the billet price decreased by RMB 120/MT in the past week. However, the profit of steel is still at high level.
Mills to restock scrap ahead approaching holidays- As National Day is approaching, small and medium-sized steel mills, which have been facing difficulty in procurement of steel scrap, need to increase the stocking before the holidays in order to avoid the traffic pressure during the holiday, though large steel mills such as Sha steel has already prepared for scrap inventory. Thus steel scrap still has room for upward adjustment. In addition, there is news that Sha steel and Yonggang in Jiangsu province will limit production by 50% in November. At present, Sha steel and Yonggang have been in normal production and have not received official notice from the government. They are still in the standby stage. Once the documents are confirmed, the price increase of finished products will also drive the scrap market.