China Crude Steel Daily Output to Fall in March

SHANGHAI, Mar. 12 (SMM) -- According to latest data from the National Bureau of Statistics (NBS), China’s output of crude steel was 61.83 million mt in February, up 10.6% YoY. Crude steel daily output averaged 2.21 million mt in February, up 7.6% MoM. YTD output of crude steel through February was 125.45 million mt, up 11.4% YoY.

Crude steel daily output for February increased significantly on a monthly basis, which was mainly due to steel mills' positive expectation towards market outlook when steel prices rose steadily before Chinese New Year holiday. Steelease believes that daily average output of crude steel will fall in March, and the reasons are as follows.

First, steel prices have fallen sharply recently, but iron ore prices have still remained at high levels, leaving most steel mils profitless. The most active rebar futures contract price fell from RMB 4,275/mt before holiday to RMB 3,875/mt, down RMB 400/mt. Despite limited price decline, bid prices for iron ore concentrate at ports have been above USD 140/mt.

Second, steel demand has not improved much, with steel inventories steadily hitting new highs. Based on Steelease survey result, steel downstream PMI was 49.44%, suggesting that steel demand contracted in February. As of middle March, many projects in north China still have not fully resumed operation. Besides, Chinese government’s new regulation on real estate market stoked pessimistic sentiment for real estate developers. Steelease believes that government’s regulation on real estate market will reduce demand for steel, which may weigh on steel prices and in turn curb output of steel.

Finally, the dense haze in many cites of China poses a challenge of environmental issue in China. Steelease believes that government may introduce some policies to protect environment, which may curb output of steel.