China’s crude steel output over January-June increased by 12% on the year to 563.33 million mt, data from National Bureau of Statistics showed July 15.
However, this situation is expected to change in the second half of 2021, with some sources seeing a significant decline in the output during the period, as China aims to curb production levels.
The drop in output is expected to keep pushing China’s steel prices up in the coming months, despite signs of demand from property and infrastructure sectors staying lackluster in H2, sources said.
China produced 93.88 million mt of crude steel in June, averaging 3.129 million mt/day, down 2.5% on the month, but still up 1.5% on the year, according to NBS.
China’s pig iron reached 75.78 million mt in June, averaging 2.526 million mt/day, up 0.2% on the month, but 2.7% lower than a year earlier. Over January-June, the pig iron output increased 4% on the year to 456.38 million mt.
China is aiming to keep this year’s annual crude steel output below 2020 levels, and has already widened its output cuts orders throughout the country.
In order to meet this target, China’s crude steel production will have to decline by 59 million mt, or 11%, on the year, to 502 million mt over July-December, S&P Global Platts calculations based on National Bureau of Statistics data showed.
Some sources said China’s crude steel production was likely to remain high at least in the first half of July, as steel output cuts in Hebei province’s Tangshan and Handan cities have been relaxed, after the centenary celebrations of the Chinese Communist Party got over in early July.
Output cuts in focus
Meanwhile, most steelmakers in other regions have yet to initiate production cuts, as they are still finalizing schedules for the second half of 2021.
But most of the market sources believe many more steel mills are likely to start output cuts from late July or August, as orders are coming in from the government, which is aiming to reduce carbon emissions in the steel industry.
One mill source said Chinese steel mills will certainly make cutback in H2, although some adjustments could be made to the output cut order if steel prices rise rapidly and create panic among the manufacturing sector.
Manufacturing is likely to receive more attention and support from the government in H2, especially as property and infrastructure may stay subdued due to China’s deleveraging campaign, the source said.
According to Platts calculations based on NBS data, China’s floor space of property new home starts in June decreased 4% on the year. The total new starts over H1 increased 4% on the year, but still 4% lower than in the same period in 2019.
Meanwhile, infrastructure fixed asset investments in June decreased 1% on the year. Over January-June, the infrastructure FAI increased 8% on the year and just 5% higher from the same period of 2019.