China Crude Steel Output Expected to Grow Slightly in December

SHANGHAI, Dec. 15 (SMM) -- Data from the National Bureau of Statistics (NBS) shows that China's crude steel output in November was 49.88 million mt during November, down 0.2% YoY. Output of finished steel was 70.1 million mt during November, up 7.8% YoY. Average daily output of crude steel was 1.66 million mt, while average daily output of finished steel was 2.34 million mt.

Although the weather turns colder and downstream demand for finished steel weakens gradually, China’s decision to cut the banks’ reserve requirement ratio helped ease cash flow pressures to a certain extent. Continuous declines in steel prices cut profit margins at steel mills and in turn depressed steel mill willingness to conduct production, so crude steel output fell significantly in November. Steelease believes average daily output of crude steel will rise slightly in December.

First, steel markets were relatively weak in November, and market transactions were sluggish as well. In addition, steel supply pressures eased due to unit maintenance at steel mills, and steel inventories were low as well. As steel prices continued to fall, iron ore prices declined in response, with lower costs helping improve profit margins at steel mills. Meanwhile, steel mills who conducted unit maintenance in October and November have gradually resumed production in December. Therefore, steel mills were more interest in production given improving profit margins.

Second, China cut the banks’ reserve requirement ratio by 50 basis points starting December 5th. Although such move has limited impact on overall steel markets, it helps improve the confidence of traders and steel mills to a certain extent. On December 9th, the NBS announced that China’s November CPI rose by 4.2% YoY, lower than the previous forecast of a 4.5% rise, triggering market expectations of a new round of easing monetary policies.