Steel Mills Mull Production Cuts

SHANGHAI, Oct. 20 (SMM) -- Steelease sources report some domestic steel mills began unit maintenance recently due to continuous declines in steel prices. Anshan Iron and Steel conducted the annual maintenance of its #2 blast furnace (3200m³) at its Steelmaking Plant on October 15th for one and a half months, with approximately 320,000 mt of liquid iron output expected to be affected and affected products including hot-rolled plate and coil and M&H plate. Chengde Iron and Steel suspended its 2500 cubic meter blast furnace on October 18th, with more than 20,000 mt of hot-rolled coil output and more than 30,000 mt of rebar and wire rod output expected to be affected. In addition, although Tangshan Iron and Steel resumed normal production, it has reduced pig iron output from October 20th due to cost and sales pressures. Furthermore, Baotou Steel plans to conduct unit maintenance of its cold-rolled production line between October 20-31, with production of about 45,000 mt of cold-rolled product expected to be affected.

Steel market prices after falling continuously have hit cost prices at steel mills, and based on past experiences, steel mills have to initiatively cut production to minimize losses. Currently, some domestic steel mills have begun unit maintenance, and although any effect on China’s total output of finished steel is limited, there is still a possibility that more steel mills will reduce production. Steelease sources report that some domestic steel mills defaulted on iron ore contracts recently, sending a signal of production cuts at steel mills.