SHANGHAI, Jun. 20 (SMM) - The NBS reported domestic crude steel output in May was 67.034 million mt, up 7.3% YoY; daily average crude steel output in May was 216.24 million mt, down 25,900 mt from April, or a drop of 1.185%. YTD crude steel output through May reached 325.245 million mt, up 8.0% YoY.

As Steelease anticipated, daily average crude steel output in May slid slightly from April. Steelease believes the drop is due mainly to decreasing margins of steel plants and weakening downstream demand expected, but domestic crude steel daily average output in June should grow marginally due to the following reasons.

First, as margins decreased due to worsening business conditions and falling steel prices, some steel plants chose to conduct maintenance in the latter half of May, with some adjusting blast furnace utilization rate. That slowed steel output growth. However, steel price drops slowed in June, with increases of some categories, and this will increase profits at steel plants. Steelease believes some steel plants will likely cut or eliminate maintenance or suspension plan.

Second, as steel prices continued to fall, traders decreased orders placed on steel plants, causing trading inventories in major domestic cities to continue falling. Despite June is a low demand month for steel, some traders expecting prices will bottom soon will build stocks, and this will boost market demand.

Third, Steelease believes domestic steel output and inventories should stand high while profits will remain low in the near term. Despite high-pollutant steel producers in Tangshan were closed, recent output was barely affected. Daily average crude steel output at major enterprises in early June was 1.7318 million mt, up 22,000 mt, or up 1.3% compared to ten days ago, according to the China Iron and Steel Association.