Beijing November 10 2021: China’s daily crude steel output has declined for a sixth straight month in October, falling 4.9% on the month and hitting a 44-month low, the China Iron & Steel Association said Nov. 9.
Industry sources expected China’s steel output to fall further in November as some steel mills were already operating at a loss.
However, China’s steel prices have continued their downward trend in November, indicating steel demand had dropped faster than the pace of decline in production, the sources added.
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CISA estimated China’s daily crude steel in October fell 21.4% on the year, to 2.338 million mt/day, which would be the lowest since March 2018.
Despite fast falling steel output, combined finished steel inventories at steel mills and spot markets monitored by CISA dropped by just 0.3% from end-September, to 22.53 million mt.
Some market sources said steel inventories fell at a much slower rate than steel production, because decline in end-user demand, especially in the construction sector, outstripped decline in steel supply.
According to property data provider China Index Academy, the value of financing by China’s property developers in October dropped 60% on the month and 75% on the year. China’s move to tighten financing in the sector is expected to continue undermine construction steel demand in 2022, some sources added.
Production slows down
Not enough steel demand generated in the domestic market has led some mills to operate at losses since November.
In addition to nationwide steel output cuts required by Beijing to keep China’s 2021 crude steel output within 2020 levels, some mills in Shanxi have recently started trimming their pig iron output by more than 20,000 mt/day, in a bid to minimize losses, some traders said.
Shanxi produced 4.747 million mt of pig iron, or 158,000 mt/day, in September.
Meanwhile, although Tangshan city in the Hebei province has recently eased steel-output-cutting measures due to improved air quality, local steelmakers were reluctant to ramp up production due to thin margins or because their operations were running at losses, sources said.
Some sources in northern China said weaker steel output may lend some support to steel prices later in November. But any rebound in steel prices were likely to be limited, as construction steel demand in northern China has already entered off-peak season due to cold winter weather, they said.
Moreover, some sources were closely watching the trend of steel prices, as falling iron ore and coke prices may leave more room for prices to fall further.