Chinese steelmakers are cutting production due to storage capacity shortage

SHANGHAI, Feb 6 (SMM) – Some Chinese steelmakers have scaled back or suspended production, as they are running short of storage capacity due to logistics constraints as the result of the recent epidemic outbreak.

Aside from storage capacity bottlenecks, raw material supply trouble, muted demand, steel price plunges and thinner profits are also reasons behind steel production curtailments. SMM learned that more mills are likely to follow suit.

Logistics issues have emerged as Chinese authorities closed roads and extended holidays to contain the fast-spreading coronavirus, which are deterring finished goods from leaving steelmakers and also impacting the shipments of raw materials. Although some mills have moved their cargoes to warehouses outside of their plants, they will still run out of storage capacity after a week, if transportation does not recover.  

Donghua Steel in north China has suspended its ESP hot-rolling line, and Rizhao Steel in the east trimmed production of rebar and other products that are less profitable.

Baosteel in central China is maintaining normal production, but sees hefty inventory pressure. Jilin Jianlong in the northeast and Zongheng Steel in north China said that their inventory pressure is bearable in the short term. The three mills, however, all see their inventory pressure mounting on logistics constraints or poor demand.

Inventory pressure at Anshan Steel in the northeast has yet to be unbearable, as transportation control there is relatively looser and the mill is putting its blast furnaces and rolling lines under maintenance.