Chinese steel mills are planning to undergo delayed maintenance work at blast furnaces and other equipment
Steelmakers typically conduct maintenance in the May-July summer months, when hot weather and rains disrupt construction activity and slow steel demand. But steel prices were strong this summer, which boosted mill profits and prompted many producers to delay the maintenance checks.
An environmental crackdown in north China during the autumn and winter, especially ahead of China's 19th party congress starting on 18 October, has encouraged mills to plan maintenance in the coming weeks. Any producers that do not comply with the environmental standards will try to rectify the issues to avoid hefty fines being imposed.
"Steel mills have been running at a high level. The pursuit of high profits had made them postpone maintenance, but recent accidents, such as the one in Bengang Steel, have made mills opt to undergo maintenance," said a Shanghai-based trader.
A blast furnace at Benxi Steel's Bengang Steel operations in Liaoning caught fire on 1 September, putting the unit out of commission indefinitely.
"Many hot-rolled coil producers are planning to conduct equipment maintenance this month because of some fire-related incidents at mills recently," said a Shanghai-based trader. "Supply of hot-rolled coil will tighten due to these restrictions and support prices in September and October."
Demand from the construction and manufacturing sectors is expected to remain stable amid the mill shutdowns, boosting prices.
The Argus assessment for Chinese export rebar rose by 2.2pc from 4-8 September to $552/t fob China, while the HRC export assessment increased by 2.1pc over the period to $590/t fob China. Argus launched daily price assessments for rebar and HRC on a fob China export and cfr Asean basis on 4 September.
Stronger domestic demand for steel in the autumn months is likely to further erode China's steel exports, while higher export prices are restricted by buyers in southeast Asia.
Chinese mills typically do not announce their maintenance schedules. Some producers have confirmed their maintenance plans to Argus but requested they not be named.
A north China-based steel mill plans to start maintenance later this month or in early October, as it looks to meet the stringent environmental conditions to be imposed in the autumn and winter.
All steelmakers in north China must obtain emissions licences by 31 October to continue to operate, while some producers in regional cities such as Tangshan and Handan must cut blast furnace output by 50pc in the winter heating season, which will start in either October or November.