Despite production increase, related industries should not be happy just yet
China steel output’s marginal increase though boded well for its construction and shipbuilding sector, the cashing in moment remains unclear.
Marginal steel output increase
A shortage of thermal coal-generated electricity supply accompanied with tightened consumption targets resulted in 18 provinces’ and regions’ enforcing power rationing in H2 September. This impacted both steel production and demand. Yet S&P Global Platts learnt this month that some steel mills resumed production.
Platts added steel mills in Jiangsu, Guangdong, and Guangxi, gradually resumed production since early October 2021. Mills in Jiangsu ramped up crude steel production by at least 25,000 t/day as of 13 October 2021. Some mills in Guangdong and Guangxi provinces are following suit. These mills where most are electric arc furnace steelmakers, suffered a 40,000 t/day’s capacity suspension in H2 September.
Daily pig iron production fell 6 per cent to 2.112 million t/day from 21-30 September 2021, compared to the previous 10-day period (11-20 September 2021). Crude steel output fell 11 per cent over the same period to 2.346 million t/day, China Iron & Steel Association (CISA) data showed. The association added that China’s daily iron output in September eventually fell 4 per cent month-on-month to 2.206 million t/day, and was down 13 per cent year-on-year. Crude steel output fell 6 per cent in September 2021 to 2.515 million t/day and was down 18 per cent on the year.
Platts reported H2 September’s power rationing mostly affected long steel mills, while flat steel producers faced only about 20 per cent of total output loss in the impacted regions. Downstream, it was flat steel that had the biggest impact as power curbs significantly affected the manufacturing sector, a major flat steel consumer. Domestic rebar prices rose 13 per cent to RMB 5,915/t (US$916/t) as at 30 September 2021, while hot rolled coil prices rose 2 per cent over the same period to RMB 5,770/t (US$897/t).
However, sources revealed most steelmakers were not expected to restore production to full capacity to ensure 2021’s crude steel output remains near 2020 levels. China had been asking steel mills to curtail production since July to keep their 2021 annual output below 2020 levels. The move is aligned with China’s overall carbon emissions reduction goals. One mill in East China planned to trim production by around 100,000 tonnes over October-November in order to keep 2021’s production on par with 2020. This will partly offset the production rebound in Jiangsu. That is a strong deterrent for any price deviation.
Marine Online News Team
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