China may see less stringent steel output controls in 2023 even as cuts widen
However, despite widening cuts, overall government-mandated production curbs are expected to be less stringent in 2023 than in 2022, limiting any major upside for Chinese steel prices for the rest of the year, they said.
Central China’s Hunan and northern China’s Shanxi plan to reduce their crude steel output in 2023 by around 1.9 million mt and 3 million-4 million mt, respectively, from 2022 levels, sources said.
Hunan and Shanxi produced 13.21 million mt and 34.51 million mt of crude steel output over January-June, both down by 3% on the year, respectively, according to the National Bureau of Statistics.
As of Aug. 29, the NBS is yet to release provincial output data for July.
In order to achieve their annual output cut goals, Hunan and Shanxi will have to reduce their daily crude steel output over July-December to around 60,000 mt and 140,000 mt, respectively, down by 13,000 mt and 50,000 mt from levels in the first half of 2023, S&P Global calculations based on NBS data showed.
Some Hebei-based mill sources said they are yet to receive government output cut orders as of Aug. 29, but they said as the biggest steelmaking hub, the province will sooner or later carry out government-mandated output cuts.
Hebei produced 116.24 million mt of crude steel output in the first half of 2023, up 4.5% on the year, NBS data showed.
The province’s daily crude steel output in the second half needs to fall by 19%, or 120,000 mt, from the first half average, to keep 2023 output on par with 2022, according to S&P Global calculations.
“But even if Hebei and more regions announce output cut plans in September, it remains unclear whether mills will implement output cuts strictly … currently the market consensus is that China’s steel output cut will be carried out loosely this year, and there is not enough time for any ambitious steel output reduction for the rest of 2023,” a Shanghai-based market participant said.
Some market sources said the domestic steel market had been trending downward since late July on market expectation that China’s crude steel output might stay comparatively high in the coming months.
Platts assessed Chinese domestic rebar prices in Beijing at Yuan 3,711/mt ($510/mt) on Aug. 28, down by Yuan 155/mt from late July, S&P Global data showed.
Other output control plans
On July 24, China’s largest steelmaker Baowu Steel Group received a government order to keep its 2023 crude steel output within 2022 levels, according to company sources.
Also, state-owned Shandong Iron & Steel plans to carry out maintenance on a major blast furnace at its subsidiary Laiwu Iron & Steel in September-October, which will reduce pig iron output by around 5,000-6,000 mt/day, company sources said this month.
Author Jing Zhang, Market Specialist – Metals
German EAF production continues slide
Crude steel output at German mills in July was virtually on par with the corresponding month of 2022, but the divergence between the oxygen and electric arc furnace routes accelerated, Kallanish notes.
With a total of 2.958 million tonnes, July production was only 0.5% lower year-on-year, according to the monthly statistics of steel federation WV Stahl. However, while oxygen-route production rose by 6% to 2.264mt, that of EAF mills dropped by 17% to 694,000t. WV Stahl speaks of a “dangerous downtrend” for EAF mills, especially, involving lower emissions but relatively higher costs amid high national electricity prices.
On top of this, EAF mills serve industries that have come most under pressure. For one thing, the slowdown in construction is challenging the country’s five rebar mills, which are allegedly extending their production breaks this summer, sources say.
Although business was thought to be better for those EAF mills serving sophisticated bar qualities, the most recent half-year figures have proved otherwise. Production at Swiss Steel, with its four mills in Germany at subsidiary Deutsche Edelstahlwerke (DEW), plunged by 20% in H1, largely due to lower sales in the automotive industry.
This is in contrast to the automotive business of oxygen-route mills, supplying strip products, which has somewhat recovered lately, hence their y-on-y increase in output. Against that, business for special bar qualities for combustion engines is suffering, caused by the rise of electric car production, which requires fewer steel components like those made by Swiss Steel/DEW.
In the first seven months of the year, German crude steel output totalled 21.485mt, a drop of around 5% from the corresponding 2022 period.
Christian Koehl Germany
Spanish scrap, rebar markets expect September price hike
The Spanish scrap and rebar markets have started the last week of August with sluggish activity. Prices remain unchanged, while demand is practically non-existent during the last days of the country’s summer holiday period, sources tell Kallanish.
“The market has begun very calmly the week, although both scrap collectors and rebar sellers expect prices to start moving,” one source observes. “The recovery in activity expected in September should lead prices up. These have remained flat since July.”
However, the positive perspective on the recovery of the Spanish scrap market is not unanimous. “Domestic prices will follow the logic of the international market, not because an improvement is expected to be confirmed in Spanish demand,” a market participant comments. He confirms that most of the large mills have finished their maintenance periods, but they have no intention of starting September at high production rates.
“Scrap purchases are slightly down compared to last year at this time. Levels for lower grades are expected to rise between €10-20/tonne in the next few days,” a collector says. “However, lower output from steel mills due to disappointing industrial activity and poor performance in the construction sector could undermine the expected recovery.”
New arisings grade E8 scrap is offered at €360/t delivered. Both E40 and demolition-quality grade E3 stand at €345-350/t, while E1 is at €300/t on the same basis.
Meanwhile, rebar suppliers in southern Spain confirm they have registered very low sales in August, with demand mainly for small domestic activities. Since mid-July, they are offering 16mm material at €320-325/t ($346.05-351.46) base. Including €262/t size extras and €23/t loading expenses, transaction values are at €605-610/t ex-works. Some offers have also been heard at €600/t delivered for 16mm rebar.
Todor Kirkov Bulgaria