This week, China intends to implement some of its most severe steel cuts, seeking to prevent air pollution in the winter and further strengthen the fragmented industry.
The first wave of production cuts will halve the rate of steel production in Tangshan, the largest steel city in northeast China. This will ultimately reduce the volume by 20 million tons of steel, equivalent to about 7.5 percent of the country's annual production. Three other key steel cities, Shijiazhuang, Anyang and Handan, will soon announce similar cuts. In addition, producers will also be required to reduce total coking coal production by 30 percent.
Production reductions are part of a plan for a number of production cuts in the rusty belt of China, which will enter into force in the next few months, as environmental authorities are implementing state obligations to reduce the concentration of solid particles by 22 percent. About 70 percent of the electricity in northeastern China is coal, which leads to a sharp outburst of pollutant emissions into the air in winter, when central heating systems are activated.
This year, authorities have become more strictly controlled by steel producers, as the country is cracking from excess capacity and pollution from heavy industry emissions. Tangshan, which produces about 11 percent of total steel production in the country, is in the zone of special attention. In March, a group of inspectors was sent by the central government to Tangshan to correct false reports about the closure of plants by local authorities, who reluctantly obeyed the orders from above.
According to analysts, the latest cuts will mainly affect small players, as a result of which the country's largest producers will not suffer.
