Posted on 16 Aug 2024
Chinese steelmakers slashed output in July as woeful demand forced steep cuts on an industry contending with a collapse in margins.
Steel production in July plunged about 9 per cent both month on month and year on year to 82.94 million tonnes, the lowest figure reported in 2024, according to the National Bureau of Statistics on Aug 15.
This leaves the total over the first seven months at 613.72 million tonnes, 2.2 per cent off 2023’s pace.
Chinese steelmakers slashed output in July as woeful demand forced steep cuts on an industry contending with a collapse in margins.
Steel production in July plunged about 9 per cent both month on month and year on year to 82.94 million tonnes, the lowest figure reported in 2024, according to the National Bureau of Statistics on Aug 15.
This leaves the total over the first seven months at 613.72 million tonnes, 2.2 per cent off 2023’s pace.
There has been little respite in the bad news emanating from the property sector. Construction starts are the steel market’s main pillar of demand, but new home sales are in a prolonged funk and foreclosures are mounting, offering few incentives for developers to build afresh. Home prices continued to fall in July, the statistics bureau said.
At the same time, the government has been unwilling to offset the weakness by ramping up spending on infrastructure. The upshot is that Chinese steel consumption may contract as much as 3 per cent in 2024 following a similar decline in 2023, according to Bloomberg Intelligence.
The steel industry has been plagued by overcapacity for years. In an effort to rein in emissions, Beijing has been trying to cap production at or below the previous year’s level after output ballooned in 2020 to well over one billion tonnes. This task is likely to be easier in 2024 as supply discipline is forced on mills looking to rescue their margins. It could also offer some relief to the countries grappling with the impact of cheap Chinese exports on their domestic markets.
German steel giant ThyssenKrupp on Aug 14 highlighted the industry’s challenges by reporting a big slump in earnings. Earlier in August, ArcelorMittal said China’s rising exports had put the global market in an “unsustainable” condition.
Iron ore futures in Singapore fell as much as 3.4 per cent to US$95.20 a tonne on Aug 14, the lowest level since May 2023. The rout in steel markets was even more marked, with rebar futures in Shanghai plunging more than 4 per cent to the cheapest level since 2017. Mining company BHP Group, which gets much of its revenues selling iron ore to China, fell nearly 3 per cent.
Prices of iron ore have hit the lowest level since 2022 on concern that global supply is running ahead of demand, with China’s steelmakers mired in a crisis.
Futures of the steelmaking material retreated by as much as 2 per cent to US$93.70 a tonne – the lowest intraday price since November 2022 – before trading at US$94.60 as at 10.19am in Singapore.
The recent sell-off has pummelled miners’ shares, with stock in BHP down by more than a fifth in Australia in 2024.
Source:The Straits Times
