SHANGHAI, Jan. 18 (SMM) -- According to latest data from the National Bureau of Statistics (NBS), China’s output of crude steel was 52.16 million mt in December, up 0.7% YoY, and China’s output of steel was 71.07 million mt in December, up 6.0% YoY. Daily average crude steel output was 1.68 million mt, and steel daily average output was 2.3 million mt.
Liquidity finally improved to certain extent in Q4 after Chinese government slightly loosened previous tight monetary policy which lasted for more than half a year. In this context, profit margin at steel mills increased to certain extent given that steel prices stabilized with improved liquidity and since iron ore declined sharply previously, so China’s output of crude steel increased slightly. However, Steelease believes that crude steel daily average output will fall slightly in January 2012, and the reasons are as follows:
First, downstream demand is still sluggish. Based on result of Steelease survey, China’s December PMI at steel downstream sectors was 41.19%, the fourth consecutive months below 50%, the lowest in 2011. Meanwhile, demand from overseas market is also quiet and China’s exports of steel also slip. The lackluster demand and sluggish exports will curb output at steel mills to certain extent.
Second, as Chinese New Year holiday falls in January, almost all traders and downstream producers will close for holiday. Although blast furnaces will not be shut down during the holiday, the reduced orders from downstream consumers and traders will lower steel output.
Finally, prices of iron ore and coke have advanced, while steel prices only cease to decline and have not rebounded. In this context, profit margin at steel producers will fall to certain extent, which will curb output from steel mills.
In summery, Steelease believes that crude steel daily average output will fall slightly in January.