Will Surging Steel Price Trigger Production Resumption at Chinese Steel Mills? SMM Survey

SHANGHAI, Mar. 14 (SMM) – Ferrous metals surged on March 13, with rebar, hot-rolled and iron ore futures closing up 5.88 percent, 4.29 percent and 4.27 percent, respectively. 

Will the surge trigger large-scale production resumption at domestic steel mills?

Falling Imported Ore to Weigh down China Iron Ore Prices, SMM Predicts

According to SMM survey, approximately 10.53 million tonnes of steel capacities, at the time of writing, will be restarted by April. A total of 4 rebar lines and 3 wire rod lines will return online. Of those, Tonggang Group will suspending production at 1,060 m3 blast furnace while restarting its 2,680 m3 blast furnace, and this will negatively affected around 1.14 million tonnes of capacities. 

In the short term, ferrous metals market is expected to remain strong, SMM predicts. 

China plans to phase out 50 million tonnes of inefficient steel capacities in 2017 according to government’s work report, and this not includes elimination task for low-quality steel, higher than market expectations. This means that impact from steel de-capacity in 2017 will be much bigger than that in 2016, which has and will boost market sentiment.  

Moreover, inventories of rebar and wire rod are both down, a reflection of moderate demand, SMM adds. 

According to SMM data, As of March 10, domestic inventories of rebar were 7.94 million tonnes, down 490,000 tonnes or 5.8% week-on-week, a bigger decline compared with the previous decline of 4.3 percent; those of wire rod were 2.19 million tonnes, down 140,000 tonnes or 6.1 percent week-on-week, also expanding from the previous decline of 5.7 percent. 

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