Steelmakers hit by glut in production, sinking prices

China Daily

The country’s steelmakers reduced output last month, adding to signs of waning demand in the world’s largest producer as companies grappled with overcapacity, sinking prices and slowing economic growth.

Crude-steel output fell 4.6 percent to 65.84 million metric tons from June, data from the National Bureau of Statistics showed on Wednesday.  

Production in the first seven months was 476 million tons, 1.8 percent less than a year earlier. Demand for steel in Asia’s largest economy is falling for the first time in a generation, spurring mills to ship record amounts of the alloy overseas as prices slump.

The yuan sank on Wednesday for a second day after China devalued it, and the move may help steelmakers sell even more of their output abroad.

Lower steel production will hurt demand for iron ore, though, which tumbled to the lowest since at least 2009 last month.

The drop also showed “that downstream infrastructure and property had no recovery, therefore demand for steel remained weak”.

Major mills in China, including Hebei Iron & Steel Co and Baoshan Iron & Steel Co, are the linchpin of the global industry, accounting for about half of the supply.

The country’s production probably peaked in 2014, according to a forecast from the China Iron & Steel Association.

Output of steel products fell 6.2 percent to 92.3 million tons in July from a month earlier, according to the bureau. In terms of daily production, output averaged 2.977 million tons last month from 3.281 million tons a month ago, it said.

Steel reinforcement bars used in construction dropped to 2,102 yuan ($327) a ton last month, the lowest price since at least 2003, according to Beijing Antaike Information. It was at 2,322 yuan on Tuesday, 16 percent lower than at the start of this year.

Mills around Beijing including those in Hebei province, the largest producing region, may face government-ordered curbs later this month and in September as policymakers seek to clean up the air for a parade and sports event.

The moves will hurt steel output, Australia & New Zealand Banking Group Ltd said on Tuesday.

“Some of the output cuts might become permanent as the government and market work in tandem to squeeze out the least-efficient and loss-making capacity,” said Li Yaozhong, head of commodities at Beijing Low Risk Asset Management Co.

Iron ore with 62 percent content in Qingdao fell 0.3 percent to $56.22 a ton on Tuesday, according to Metal Bulletin Ltd. Prices, which bottomed at $44.59 on July 8, are 21 percent lower this year.

4 thoughts on “Steelmakers hit by glut in production, sinking prices

  1. JD has mentioned that a ton of Cabbage was selling for ‘more’ than a ton of Steel in China … I looked but couldn’t find that stat but I don’t doubt it since one can NOT survive by eating steel;~(((


  2. We’re selling our scrap to China, they process it and sell it back to us. The grade is weak compared to our production. At the City Center here in Vegas they used steel from China in more than one building causing them to only go something like 24 floors as apposed to 30 because of the strength of the steel. Just more crap we get from them.

  3. Our Steel Mills here are full of steel too , aint going anywhere , and most of them are hardly producing any more due to the overstock

    its not a good sign

    also look at what “heavy” scrap is going for now in this country.. aint enough to put gas in the truck hauling the scrap

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