Major steel mills in North China resume at 70% utilization

Furnaces at all major steel mills in Tangshan, Hebei province in northern China, the world's # 1 steelmaking city that produced about 14 percent of China's crude steel in 2020, are on fire again, an industry report said Monday.

However, due to the country's continued drive to reduce carbon emissions, the furnaces remain at 70% capacity, excluding those that meet the most stringent emission standards.

Given the growth in steel production in the first half of this year and the country's goal of not increasing steel production on an annual basis, industry experts said that rough steel production should decline by about 60 million tonnes in the second half of 2021. , which will affect the demand for imported iron ore and iron ore prices.

Most steel mills in Tangshan have resumed production at 70 percent capacity, which they plan to maintain until the end of the year, according to a report from industry portal mysteel.com citing field research.

The move is seen as easing a tighter production restriction previously imposed that prevented many steel mills from keeping production at 50 percent as the government balances strong demand for steel from a recovering economy and its commitment to the environment. The steel sector accounts for about 15 percent of China's emissions.

Increases in production capacity at steel mills boosted iron ore prices on Monday. The best-selling September iron ore contract on the Dalian China Mercantile Exchange rose 6 percent during the day to 1,225 yuan ($ 189.6) a tonne.

Zheng Weiwei, a Shanghai-based steel trader, told the Global Times on Monday that steel futures prices rose, but spot prices remained unchanged, citing inelastic demand and government crackdown on runaway steel prices that threaten producers' profitability.

However, Wang Guoqing, director of research at the Beijing Information Research Center for Lange Steel, told the Global Times on Monday that steel mills will have to avoid producing about 60 million tonnes of rough steel in the second half to maintain a commitment to increase steel production from 2020 levels.

“The production limitation in Tangshan, which began in March this year, could reduce crude steel production by 34 million tonnes per year, which means a 48 million tonne reduction in demand for iron ore,” Wang said.

In the first five months, steel production in China reached 473 million tonnes, an increase of 1