Posted on 22 Aug 2023
China’s steel market has been under pressure in August, as steel production has not shown signs of slowing despite sluggish end-user demand, with trading sources expecting any upcoming government-mandated steel output cuts in 2023 to be less stringent than 2022.
China’s blast furnace utilization rates rose over Aug. 14-18 to around 92%, from 90% at the end of July and 84% a year earlier, according to trading sources.
Although market chatter indicated that Hebei and Jiangsu provinces, China’s leading steelmaking hubs, could verbally inform major local mills about output reductions, some local mills in the regions had not received any official communication as of Aug. 18.
“I still believe some major Chinese mills will have to start slowing production in September or October, but it remains unclear to what extent China’s total steel output cuts will actually be implemented for the rest of the year,” a mill source said.
Given the government’s ambiguous stance over steel output controls this year, mostly because of slower economic growth, some traders expected government-mandated steel output cuts on a smaller scale than 2022 and targeting only those environmentally sensitive regions. The prospects have dented market sentiment.
China’s robust steel production and weak end-user demand in the wake of deteriorating growth in the property sector and unfavorable weather conditions across the country have led to a rise in steel inventories since the start of July, trading sources said.
Rebar inventories in eastern trading hub Hangzhou increased by about 15% as of Aug. 18 from the start of July and 50% from a year earlier, according to trading sources. Meanwhile, long steel inventories in northern Beijing — mainly rebar and wire rod — were still about 4% lower on the year, but up 22% from early July.
Hot-rolled coil inventories as of mid-August in eastern China’s Shanghai increased 28% from early July and about 4% on the year.
Meanwhile, Chinese domestic rebar and hot rolled coil prices fell Yuan 144/mt ($19.7/mt) and Yuan 190/mt from late July, respectively, to Yuan 3,722/mt and Yuan 3,900/mt on Aug. 18, S&P Global Commodity Insights data showed.
“Even if some mills start cutting back in September, I don’t think steel prices could rise significantly, as deteriorating property investment and new home construction starts will undermine seasonal demand recovery,” a southern Chinese trader said.
Source:Platts
