China Sees Strong Rise In February Steel, Base Metals Output

Mar.12 -- China's crude steel output, as with most industrial commodities, picked up sharply in February, with the average daily production reaching 1.9 million metric tons and inching close to the record 2 million tons posted in June, the National Bureau of Statistics said Friday.

The data suggest that stabilizing prices earlier this year had encouraged more mills and smelters to restart production lines after a slow return from the Lunar New Year.

The country produced 55.88 million tons of crude steel in February, an increase of 3.3% on year, and 112.6 million tons in the first two months of the year, an increase of 2.2% on year, the data showed.

Daily average production, a more accurate representation of steel making activity, rose to 1.9 million tons, sharply higher than the 1.68 million tons a day posted in December and topping the 1.8 million tons in January.

"Crude steel production has been recovering since the fourth quarter nadir," said Mirae Asset Securities analysts Henry Liu and Shirley Zhao.

Mirae's view that steel mills remain profitable despite poor margins temper the worries expressed this week by leaders of large steel mills at the country's annual legislative session, the National People's Congress.

Gu Jianguo, chairman of Maanshan Iron & Steel Co. (0323.HK), said China's steel sector faces "grave difficulties" this year due to Beijing's property curbs.

However, Zhu Jimin, chairman of China Shougang Group, the country's sixth largest steel producer, had hinted at the production binge when he said oversupply was hurting the industry and outpacing actual demand.

Copper production in February also rose, up 9.5% on year to reach 437,000 metric tons. Output in the first two months rose 6.9% to 870,000 tons, the bureau said.

The data may be skewed because of the week-long Lunar New Year break in late January, which halted all industrial output, analysts said.

"January production was affected by the Lunar New Year, and raw material supply was quite robust in February which led more smelters back to production," said Grace Qu, copper analyst with Beijing-based CRU Group consultancy.

Base metals production across the board also rose in February, on an on-year basis. This included higher production of lead, zinc, tin, nickel, aluminum and alumina.

In the first two months, only zinc and tin production fell on year.

Iron ore output in February rose 24% on year to 81.6 million tons, while production in the first two months rose 16.3% to 153.1 million tons.