More Chinese steel mills receive output cut orders

More mills in China’s Shandong steel hub have received informal orders to limit their output, industry sources told S&P Global Commodity Insights Aug. 11, similar to the request made to China’s largest steelmaker Baowu Steel Group in July.

A major state-owned steel mill in the Shandong province recently received government orders verbally asking it to restrain its total crude steel output this year to 2022 levels, according to sources close to the matter.

Meanwhile, some market sources said another major mill in Shandong also received verbal orders to rein in its steel production. However, a source with the mill said his company was yet to receive any official order.

Other regions such as the Hebei and Yunnan provinces could be set to introduce steel output controls too, likely aimed at holding annual crude steel output this year to 2022 levels, some market participants said.

The Chinese steel market remains under pressure from oversupply despite news of the output restraint orders, with no indications as yet when mills will implement cuts and August steel output looing likely to be higher than in July, market sources said.

Blast furnace utilization rates continued to edge up in the week of Aug. 7-11 to around 91%, up from 90% at the end of July, according to sources.

Meanwhile, rebar inventories in the eastern trading hub Hangzhou as of Aug. 10 were about 18% higher from early July and 45% higher on the year, sources said.

Amid strong production and rising inventories, the Chinese domestic rebar prices in Beijing fell by Yuan 145/mt ($20.1/mt) from Aug. 1 to Yuan 3,711/mt on Aug. 10, S&P Global data showed.

Average daily crude steel output over September-December will have to fall by 19% from July-August levels to around 2.43 million mt/day in order to keep China’s annual crude steel output at par with 2022 levels, S&P Global calculations based on data from the National Bureau of Statistics and China Iron and Steel Association showed.

“I believe Chinese domestic steel demand will remain weak in the remainder of 2023, so even if China strictly keeps its crude steel output within 2022 levels, the Chinese steel prices are unlikely to increase significantly,” a mill source said.


Jing Zhang – Metals Market Specialist