Production cuts to further suppress China’s daily crude steel output

SHANGHAI, Aug 15 (SMM) – While China’s crude steel output hit a fresh record high in July, the daily average dipped after it has risen for six consecutive months. This suggested the widespread production cut due to Beijing’s environmental protection drive is at play, SMM believes.  

Data from the National Bureau of Statistics (NBS) showed that average daily output of crude steel across the country came in at 2.62 million mt last month, down 1.97% from the prior month. The July production, at 81.24 million mt, was up 7.2% year on year and brought the total in January-July up 6.3% to 532.85 million mt.

Daily output of pig iron averaged 2.18 million mt last month, down 0.82% from the previous month. Output in July stood at 67.52 million mt, up 4.2% from a year ago. Output in January-July came in at 441.79 million mt, up 1% from a year ago.

Daily output of steel products saw a 3% monthly decline and came in at 3.09 million mt last month. Production amounted to 95.69 million mt in July, up 8% year on year, and 625.87 million mt in January-July, up 6.6% year on year.

Such decline in mills’ daily output was small amid the broad-based production limitations as high profit margins drove mills to maintain their output by using more steel scrap. The production cuts were mainly imposed on blast furnaces over the past month.

SMM learned that the proportion of scrap among raw materials into furnaces has reached 27-30% at some mills with limited upward room likely in the future. Besides, the production cuts would extend to other regions in August, which would further weigh on operating rates at blast furnaces.

Production cuts on blast furnaces in Fengnan and Guye districts in Tangshan rose to 50% earlier this week. Blast furnaces in Xingtai, Hebei province, Pingxiang, Jiangxi province, and Changzhou, Jiangsu province also faced limitations.

Operating rates across Chinese mills are expected to average at 85.4% in August, down 1.1 percentage points from July, SMM research found. Crude steel daily output is set to further decrease in August.