Chinese steelmakers mulling production cuts amid sluggish market

The prolonged sluggishness in China’s steel market and a squeeze on profits have led some steelmakers to consider production cuts in a bid to support prices.

Paragraph entered by Atlantic migration, in order for SteelFirst articles to display correctly on Metal Bulletin.

“We have already been losing money at current price levels, and could suffer more if prices continue the downward trend. I think this is not endurable, thus we might consider holding our prices by controlling output,” a northern Chinese mill source told Steel First.

“Steelmakers are feeding on August raw materials at the moment and they are making minor losses of about 100-200 yuan ($16-33) per tonne.

“When we move into November, especially late November, mills will be feeding on higher-priced raw materials from the September bookings. We may cut production by then to avoid larger losses,” an industry analyst in Beijing said.

Slack demand from end-users during winter could also lead to a drop in steel production from November onwards, a source at a north-eastern Chinese mill suggested.

China’s steel production has actually been showing signs of slowing down, with domestic steel prices falling since September.

The country produced 2.1271 million tpd of crude steel during the first ten days of October, down 1.1% from the last ten days of September, according to the latest estimates by China Iron & Steel Assn.

Tangshan’s billet price fell by a total of 180 yuan ($29) per tonne between August 30 and October 21, according to Steel First’s price archive.

Although the billet price recovered by 20 yuan ($3) per tonne on Tuesday October 22 driven by improved sales to major end-users including sections producers, the increase is unlikely to be sustainable given that steel mills are generally holding on to plenty of unsold products, market sources say.

Meanwhile, a Shanghai-based analyst argued that it would be difficult for mills to make big movements in production cuts.

“I don’t think they will shut down blast furnaces or something else. They could at most lower their blast furnace utilisation rate or plan some maintenance,” he said.

Currently, only several Chinese steelmakers are conducting maintenance on a small scale. Blast furnace utilisation rates remain high at nearly 94% in Tangshan city, according to the analyst.

What to read next
Market participants are cautiously optimistic about a rebound in iron ore concentrate premiums, with steelmakers around the world set to ramp-up production in line with an anticipated increase in demand for steel products, Fastmarkets understands
General Motors (GM) is investing $650 million to develop the Thacker Pass mine in Nevada, the largest known source of lithium in the US and the third largest in the world
Electrolysis processes developed by Boston Metal and Electra that eliminate the need for coal in steel production could be key to a net-zero emissions future for the metallics industry, attendees learned at Fastmarkets’ conference on January 17-19 in Dallas
Low supply, strong demand to spur scrap prices higher in Feb, market says
US deep-sea ferrous export prices from the East Coast to Turkey have plateaued, with a Turkish mill purchasing a cargo at prices stable from the last-reported sale
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.