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Hebei steel capacity cuts hit 2M tonnes through Oct.

Keywords: Tags  Macquarie Group, Hebei province, China steel production, steelmaking capacity, iron production capacity

SHANGHAI — More than 2 million tonnes of iron and steel production capacity were cut in China’s Hebei province through the end of October, China’s Ministry of Information and Technology said Nov. 1.

The province, China’s steel production hub, has cut 1.3 million tonnes of iron production capacity, 1.1 million tonnes of steelmaking capacity and 3.6 million tonnes of coke capacity as of Oct. 31, the ministry said.

The capacity cuts were completed two months ahead of schedule and exceeded the requirements of China’s central government, the provincial government said.

Beijing had ordered Hebei province to cut 800,000 tonnes of iron production capacity, 200,000 tonnes of steelmaking capacity and 400,000 tonnes of coke capacity by year-end.

The provincial government said in September that 60 million tonnes of steel capacity would be cut by the end of 2017 to control air pollution in the region (, Sept. 13).

But the steel market has yet to see a significant drop in output. The country’s daily crude steel production totaled nearly 2.11 million tonnes per day in mid-October (, Oct., 28).

"We had been cynical when the government first started talking about putting pressure on the steel industry to reduce emissions, but for Hebei at least the effects have been real," analysts at Australia’s Macquarie Group Ltd. said in a report following a visit to Hebei.

With production restricted and mills making meaningful adjustments to their raw material blends, premiums for higher-quality raw materials are being driven up, Macquarie said.

"Mills were being encouraged to install desulfurization equipment or risk being forced to shut down. Indeed, shutdowns were already occurring with the particular pressure on the use of sinter plants," Macquarie said.

More production cuts are likely in early November.

"We may see some temporary production cuts possibly ordered by the government before and during the third plenary session (of the Communist Party of China’s central committee) in November," a Beijing-based analyst said.

A version of this article was first published in AMM sister publication Steel First.

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