Strict implementation of environmental controls in Tangshan paralyzes iron ore procurement

Singapore — Spot iron ore procurement in Tangshan, China's top steel producing province, were slowed significantly by strict implementation of environmental controls on truck deliveries and sintering operations on March 9, following a renewed emergency response to heavy pollution weather on March 7.

A notice released by the Tangshan government on March 7 said: "The city will initiate Level II emergency response to heavy pollution weather at 4pm on March 7, and the release time will be notified later."

Under the emergency response, "mining, coal preparation, ports, logistics and other operations that involve the transportation of bulk raw materials and products are prohibited from using heavy trucks at or below the fourth national level [of emissions]."

Port stock iron ore transactions at Tangshan ports was muted on March 9 amid concerns over delivery of raw materials via truck, according to traders based in northern China.

A procurement source said: "It is almost impossible to deliver raw materials from Tangshan ports now due to the limited allowance of trucks."

"Caofeidian and Jingtang ports may be closed from time to time during the emergency response period to limit heavy trucks on the roads," another procurement source in the region said.

Platts 62% Fe iron ore port stock index, IOPEX North China, dropped Yuan 62/wmt on the day to Yuan 1133/wmt FOT March 9.

Apart from trucking restrictions, market sentiment on sinter feed demand was also hampered by production curbs of more than 30%-50% for sintering plants in Tangshan.

"Pollution levels are still concerning amid the ongoing Two Sessions in Beijing," a market source in Hebei said. "As Hebei is close to the capital, the implementation is getting stricter."

Prior to latest announcement, the Tangshan government had initiated two rounds of Level II emergency response, with mandatory emission reduction measures on steelmaking companies, for periods across Feb. 8-15 and Feb. 23-March 5.

Based on the government notices, 22 mills in Tangshan were asked to reduce emissions on Feb. 8. The number of mills increased to 23 on Feb. 23 and to 25 in the latest notice on March 7.

A steelmaker source told Platts: "There has not been a cut on blast furnaces but a sintering cut of at least 50% is being strictly implemented."

There was uncertainty on the duration of the control measures; some end-users said a Level II emergency response would usually last for a week, while others predicted further rounds of environmental controls would be announced later in the month.

The most actively traded iron ore contract on the Dalian Commodity Exchange for May 2021 delivery opened at Yuan 1140/mt on March 9, and closed at Yuan 1031.5/mt, a drop of 9.95% from the previous settlement price of Yuan 1145.5/wmt, DCE data showed.