SHANGHAI, Jun. 13 (SMM) -- According to the NBS, domestic crude steel output in May was 61.23 million mt, up 1.1% YoY. Steel output was 81.67 million mt, up 0.7% YoY. Daily average crude steel output in May was 1.98 million mt, down 2.2% MoM.
Daily average crude steel output dropped slightly in May as continuous falling steel prices resulted in low profit regions or losses at steel plants, allowing a few steel plants to enhance maintenance and cut output. But in general, steel plants did not cut output significantly, with supply and demand imbalance remaining. Steelease believes daily average crude steel output in June should continue to drop slightly.
First, according to the Steelease survey, steel PMI in May was 43.91%, down MoM 8.82%, and 1.51% YoY. That indicates demand from downstream industries began to weaken. Some manufacturing industries entered seasonal low demand period in June, and demand from the building industry is also limited with regulation at the property sector. In this context, demand for iron and steel slid.
Second, steel prices remained low recently. Baosteel lowered prices by RMB 100-300/mt on June 11th, while other steel plants also lowered ex-work prices, causing profit margins at steel plants to slide. Steelease predicts steel prices are pessimistic given supply and demand imbalance, and steel plants will unlikely expand capacity.
Third, some of domestic regions entered the rainy season in June, with some building and infrastructure construction sites expected to be affect. In response, purchases for steel should fall, indirectly affecting steel output.