September 4, 2017 / 11:35 AM / a year ago

China's Bengang strives to meet orders after fire shuts third of iron capacity

BEIJING, Sept 4 (Reuters) - China’s Bengang Steel Plates Co said it aimed to honour deliveries to customers after a fire at one of its blast furnaces on Friday shut down more than a third of its ironmaking capacity.

The damaged blast furnace in Liaoning province, with an annual design capacity of 3.79 million tonnes of pig iron, was undergoing repairs and it was “unclear when could be resumed,” a spokeswoman for Bengang’s parent company Benxi Steel Group said on Monday. Bengang owns four blast furnaces with a total capacity of around 10.75 million tonnes.

The shutdown at Bengang sent the most actively traded hot rolled coil contract on the Shanghai Futures Exchange to a record high on Monday.

The company produced 9.69 million tonnes of pig iron and 11.27 million tonnes of hot rolled steel coil in 2016. About 10,000 tonnes of daily pig iron output could be affected, according to Reuters calculations.

“The fire is purely an accident ... it does not disrupt our whole production process and does not cause a supply shortage,” the Benxi spokeswoman said, declining to give her name. “We are making efforts to guarantee delivery.”

Bengang plans to carry out safety checks as it investigates the cause of the blaze and will adjust its maintenance and production schedules to prevent further accidents, according to a statement posted on Benxi’s website on Monday.

Details of the adjustment have not been disclosed.

The most actively traded hot rolled coil contract on the Shanghai Futures Exchange soared as much as 6 percent after the accident on Friday, and reached a record high of 4,400 yuan ($674.48) per tonne on Monday as investors fretted about tight supply.

Beyond the impact on Bengang itself, analysts and investors are concerned the incident could trigger stricter safety inspections at mills across China.

“We haven’t seen any supply shortage in the physical market at this moment,” said a Liaoning-based steel trader. “The trading volume is even going down since it takes time for the market to accept such a high price.”

“However, everyone holds expectations of tight supply in the future as mills may slow down their pace of churning out steel products due to safety reasons,” he added.

Last week, China’s State Administration of Work Safety said it would start carrying out nationwide safety inspections this month in various industries, including coal, chemicals, transport and construction.

“Some more steel capacity is likely to be affected under the nationwide inspection, but it is hard to estimate how big the impact will be,” said Richard Lu, a Beijing-based steel analyst for consultancy CRU.

Rebar, a construction steel product, has also rallied in Shanghai since Friday and hit a four-and-a-half year peak in early trade on Monday.

$1 = 6.5235 Chinese yuan renminbi Reporting by Muyu Xu and Tom Daly; Editing by Susan Fenton

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