China’s Daily Crude Steel Output to Rise Slightly in March

SHANGHAI, Mar. 13 (SMM) -- According to the latest data from China’s National Bureau of Statistics, crude steel output over the full 29 days of February stood at 55.88 million tonnes, up 3.3% YoY, while crude steel output in the first two months of 2012 was 112.6 million mt, up 2.2% YoY. Finished steel output in February was 71.27 million mt, up 12.2% YoY. Average daily crude steel output in February was 1.927 million mt, while average daily finished steel output was 2.458 million mt in February.

As the Chinese New Year holiday ends and the weather turns warmer, downstream demand for steel began to improve, and steel prices also rose steadily after the holiday, allowing steel mills to ramp up production. Steelease believes China’s average daily crude steel output in March will continue to grow slightly.

First, downstream demand will likely continue improving. According to the Steelease survey, the Purchasing Managers Index (PMI) of steel downstream industries was 57.71% during February, with the index ultimately returning above 50% after remaining below 50% for five consecutive months. Steelease believes downstream demand for steel products will likely improve further.

Second, recent rises in steel prices help improve profit margins at steel mills, creating incentives for steel mills in production.

Third, according to the Steelease survey, finished steel output at major steel mills grew slightly in March.

However, current finished steel inventories remain high, which will constrain the improvement in market demand. Therefore, Steelease believes any increase in crude steel output in March will likely be quite limited.