China Tangshan City Halts Steel Production on Smog
Comment of the Day

November 04 2016

Commentary by Eoin Treacy

China Tangshan City Halts Steel Production on Smog

This article by Alfred Cang for Bloomberg may be of interest. Here is a section:

Tangshan, China’s largest steel-making city, orders mills, coking plants, cement and glass industry to halt production because of heavy air pollution, consultant Mysteel says in note Friday.

City halts production in all factories that discharge “volatile organic compounds”

City halts production of coal-fired boilers except ones used for central heating

Suspension starts 3pm local time

City also bans trucks with articulated five axles or more from 6pm. Tangshan is about 180 kilometers east of Beijing

Eoin Treacy's view

It’s that time of year again when Beijing is shrouded in smog and when parents really worry whether that lung infection their only child has is ever going to get better. In winter the prevailing wind generally blows from the Northwest. While Tangshan is a major steel and heavy industry hub, it is unlikely to be the only source of pollution since it lies to the east of the city. 

The gradual rationalisation of heavily polluting, inefficient steel production is good news for the global sector because it helps to reduce the overhang of cheap supply coming from China. Clicking through the constituents of the steel section of the Chart Library there is evidence of some steadying following sharp pullbacks last year. 

Arcelor Mittal has held a progression of higher reaction lows since early this year. 

UK listed but Russian controlled Evraz Plc is somewhat overextended relative to the trend mean at present. It will need to find support above, or in the region, of the trend mean if medium-term
potential for higher to lateral ranging is to continue to be given the benefit of the doubt. 

Interestingly Brazilian listed Gerdau has a similar pattern overall. 

US listed Nucor has unwound its early overextension and is now firming from the region of the trend mean. 

Steel Dynamics found support three weeks ago in the region of the trend mean and posted an emphatic rebound. A pause in the region of the previous peak is to be expected but as long as it is trading above the 200-day MA we can conclude the share is in a demand dominated environment. 

US Steel bounced this week from the region of the trend mean. 

South Korean listed Posco has been forming what appears to be a first step above the Type-2 bottom for most of this year and a sustained move below the trend mean would be required to question medium-term recovery potential. 

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