China’s steel output seen rising in September, but growth limited

China’s daily pig iron and crude steel output remained buoyant in mid-August, despite ongoing power shortages affecting steel production in some regions along the Yangtze River.

Steel output is expected to increase in late August and September due to power restoration, while steel demand recovery in tandem with favorable cooler weather would also support higher production, industry sources said.

China’s daily pig iron and crude steel output over Aug. 1-20 increased by 1.8% and 0.5% from early August to 2.398 million mt and 2.74 million mt, respectively, data from the China Iron & Steel
Association showed Aug. 24.

As a result, daily pig iron and crude steel output in the first 20 days of August averaged at 2.376 million mt and 2.733 million mt, up 4% and 4.5% from July, respectively. On a year-on-year basis, daily pig iron and crude steel output in July was up 3% and 1.8%, respectively.

Power shortages along the middle and lower reaches of the Yangtze River, which began around Aug. 15, production at electric arc furnaces got impacted, mostly in the Sichuan province and the Chongqing municipality.

Most of the EAFs in the two regions suspended production during Aug. 15-17, and some market sources said.

However, as the EAF utilization rates were low since July due to poor steel demand in the summer season, additional output cuts at the EAF steel makers did not account for a substantial decline in the share of national crude steel output, some market sources said.

Power shortages have also affected a few integrated steel makers in Chongqing, Hunan, and Anhui, but the impact was only limited to their rolling mills and not pig iron or crude steel production.

On the other hand, steel mills in northern China ramped up production since the start of August amid improved steel prices and margins. This move followed widened steel output cuts in July and reduced inventories, contributing the most to the growth in iron and steel output in August.

Steel production in the heat-affected regions may gradually recover from Aug. 24, when the weather forecasts indicate heat waves to wind down.

However, some market sources said China’s iron and steel output in late August and September were unlikely to exceed the levels seen in May or June, as steel demand recovery this autumn should be modest, weighed on by the property sector’s debt crunch.

China’s daily crude steel output over Aug. 1-20 was still 12% lower than in May and 9.6% lower than in June, according to the CISA data.

Finished steel inventories at steel mills and spot markets monitored by the CISA reached 27.07 million mt as of Aug. 20, down 1% from the end of July and almost at the same level as a year earlier.

The rebar inventories at spot markets dropped the most and were 31% lower on the year. Some market participants said lower inventories could lend some support to the steel market.

This also indicated a poor outlook for the construction steel demand led to significant output cuts on rebar and traders’ destocking, they added.

Source: Steel Business Briefing Ltd