Henan province launches winter output cuts, 384 refractory enterprises involved

By Carrie Shi
Published: Thursday, 20 December 2018

Henan province launches new round of output cuts to run to March 15, 2019, while more magnesia producers in Liaoning province shut down.

Henan province in central China has launched a new round of output cuts for the refractories and steel industries to run from November 15, 2018, to March 15, 2019.

Over the period, Henan will impose limits on both industries to reduce emissions when pollution levels worsen during the winter heating season - a move that will lead to a reduction in demand for industrial raw materials.

Some 599 businesses have been affected by the latest round of production cuts, including 384 refractory enterprises, 70 foundries, 53 brickworks, 13 cement producers, 12 ceramics companies, five non-ferrous metals recycling firms, four steel plants and three electrolytic aluminium manufacturers, among others.

Henan has imposed a 30% cut in refractory output, and while raw materials prices are expected to remain firm until the end of 2018, the curbs on downstream demand will make it difficult for raw materials producers and suppliers to maintain or increase prices.

Refractory raw materials, such as magnesia, have meant prices remain firm on tight supplies, with more companies halting production due to the environmental regulations. Quiet demand has resulted in fewer deals being concluded on the spot market.

Export prices steady

Meanwhile, more local magnesia producers in China’s Liaoning province have stopped production because of the latest round of stricter inspections to monitor compliance with environmental regulations.

China’s government imposed another round of environmental inspections on heavy industries in several provinces, including Liaoning, for the period October 31-November 31.

Domestic magnesia prices in the East Asian country remained firm on falling supply levels due to the regulations and because of consolidation in the magnesia industry, while export prices have been holding steady at current levels despite a lack of buying activity.

The regional government in Liaoning, the production hub for magnesia, has increased its efforts to consolidate the provincial magnesia market and control environmental pollution and has made progress on consolidation in 2018.

The city of Dashiqiao had closed all its dead-burned magnesia (DBM) kilns by mid-October to meet the new emissions standards. Some fused magnesia producers in the area have also halted production due to environmental inspections.

Producers insisted on firm offer prices for domestic fused magnesia, while export prices were unchanged on slow buying.

"Supply has become tight with the new round of environmental inspections from the central government, but we haven’t adjusted export prices by much because limited orders have come from overseas buyers," an exporter in Dalian told Fastmarkets.

Fastmarkets’ assessment of the price of fused magnesia, 97% MgO (Ca:Si 1:1), lump, was $1,000-1,100 per tonne fob China on Tuesday December 11. While the price of 97% MgO (Ca:Si 2:1), lump, was $1,250-1,350 per tonne fob China, also assessed on Tuesday December 11. 

DBM and caustic calcined magnesia (CCM) export prices held steady on sluggish buying activity although domestic prices remained firm.

Fastmarkets’ price assessment for DBM, 90% MgO, lump, was $240-270 per tonne fob China, and the price of CCM, 90-92% MgO, was $180-220 per tonne fob China on December 11.