China’s total domestic crude steel output during May was 70.43 million tonnes, up 2.3% month-on-month and 5.1% year-on-year. The average daily crude steel output for May was 2.27 million mt, down 1.0% month-on-month, according to the National Bureau of Statistics. 

 

The decline in May was due mainly to unit maintenance by the large number of steel mills and the arrival of low-demand season. During June, tight liquidity and poor orders will further depress steel mill enthusiasm in production, Steelease understands. 

 

According to Steelease sources, some steel mills, especially SMEs, were forced to conduct maintenance or cut output during June due to a lack of profits. Although additional banks were allowed to cut their deposit reserve ratios by 0.5%, the PBOC only allowed cuts at those banks that met specific requirements. Steelease believes tight cash flows will be a major factor affecting output during June. 

 

Falling downstream orders will further depress steel plant output. In late April, many downstream steel-consuming sectors, especially manufacturing sectors, entered a low-demand period, and as a result, the Steel PMI for May fell to 46.53, with a seasonally adjusted PMI of 48.95. This decline in manufacturing activity will cause steel demand and output to fall.