Chinese Steel Mills Under Enormous Pressure To Cut Production In Second Half Of The Year In Order To Meet Policy Curbs

SHANGHAI, May 10 (SMM) - Recently, steel mills in some parts of China have received notices requiring them to formulate reasonable annual production plans to ensure that their crude steel output does not exceed last year’s level. This year is the third year for the implementation of crude steel production restriction policy and this policy did not arouse much reaction in the market. Instead, market players are more concerned about whether steel mills will be under pressure to limit production in the next few months.

According to SMM’s estimates, China's daily average crude steel output stood at 2.91 million mt in the first quarter, an increase of 7.47% year-on-year. China's daily average crude steel output stood at 3.09 million mt in March, an increase of 8.42% year-on-year. In order to ensure this year’s crude steel production does not exceed last year’s level, the daily average crude steel production must be capped at 2.73 million mt in April-December, a year-on-year decrease of 2.36% and down 11.5% from March. As steel mills ramped up production in the first quarter, they are under considerable pressure to reduce production in the rest of the year.