Pollution laws target Chinese steel mills

Environmental regulators in China are reportedly targeting steel mills in the city of Tangshan, China, with stricter emissions limits that could cut into production in the steel-intensive region.

According to a Reuters report, new standards to be enforced in the summer and early fall of 2015 could force furnace and mill closures and thus cut into China’s steelmaking capacity glut.

More than 25 steelmakers operate in the city, located less than 100 miles east of Beijing, operating more than 100 blast furnaces, according to Reuters. The city’s estimated annual production of 90 million metric tons of steel surpasses that of the entire United States.

The measures, which in part target the use of lower-grade coal, have been designed to ease air pollution in Tangshan and Hebei Province in which it is located and also to bring China’s steel production closer in line to what it is estimated to consume annually by 2017.

China’s current annual steel production rate of more than 820 million metric tons has resulted in an overcapacity situation that has lowered steel prices globally as exported Chinese billet and finished steel has been shipped into other nations. The low steel prices have likewise suppressed the value of ferrous scrap.

The Reuters report says steel traders in China are already anticipating the emissions enforcement effort will have an impact, with billet prices in northern China rising by as much as 60 Chinese yuan ($9.50) per ton in mid-July.