Chinese steelmakers start trimming production

Chinese steelmakers have begun reining in output to minimise losses, but market participants said much steeper production cuts may be needed to stabilise prices.

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Anshan Steel, Benxi Steel, Rizhao Steel and Shougang are among big producers bringing forward maintenance to cope with a collapse in the market because of flagging demand and oversupply.

Steelmakers were forced to act after prices of rebar and hot rolled coil in most markets sank to levels unseen in more than two-and-a-half years.

“Those who can’t afford further losses are forced to cut output,” a trader in Shanghai said.

Full details of production changes could not be confirmed for all steelmakers, but adjustments include the following:

– Anshan Steel plans to conduct maintenance on some HRC and cold rolled coil lines for 8-10 days from late July, but has not specified how much this will cost in lost output.

– Taiyuan Steel will put one of its HRC lines on maintenance from early August for 20 days, cutting output by about 80,000 tonnes.

– Jinan Steel, part of Shandong Steel Group, started a five-day maintenance on Tuesday July 24 on its HRC line, which would cut production by 25,000 tonnes.

– Liuzhou Steel in Guangxi province said it would suspend a 2,000 cu metre blast furnace, and halt HRC, bar and wire rod lines for maintenance for at least 15 days from Tuesday. A 15-day stoppage of its HRC line will cut 120,000 tonnes worth of output, market sources said.

Most will schedule their maintenance in August, a sales official with Hebei Steel Group said.

More steelmakers will have to cut output to stop the slide in steel prices.

In the Shanghai market, spot HRC prices are now at 3,680-3,700 yuan ($582-585) per tonne, the lowest since December 2009.

Production cuts by the biggest state-owned producers and larger steelmakers are likely to be fairly tentative, as they wait for smaller mills to be flushed out of the market, a stockist source in Tianjin said.

It will take about 15-20 days for the output reduction to take effect, which means spot steel prices will only stop falling in early August, according to the official with Hebei Steel.