Blast furnace operating rates in China slipped again as floods deterred shipments

SHANGHAI, Jul 23 (SMM) – Operating rates of blast furnaces at Chinese steelmakers failed to extend a rebound from the prior week, falling 0.23 percentage point from a week ago to an average 90.07% during the fourth week of July, showed an SMM survey.

Some steel mills carried out maintenance on their blast furnaces amid the impact of rainfall-induced floods. The floods had led to the closure of some ports along the Yangtze River, deterring shipments of raw materials and finished products. SMM expects the operating rates to stay steady at high levels next week. 

Steel plants in China’s top steelmaking city of Tangshan are required to implement production control of various degrees between 16:00 CST July 19 and 16:00 CST July 24, according to a release by the local government. The output curbs are on top of the current environmental production measures for July, a move aimed at fighting bad air quality expected during July 19-24. 

Demand for steel is expected to increase as China will intensify the renovation of old urban residential areas in 2020. A total of 39,000 communities are planned to be renovated, twice the number as compared with the previous year, according to a statement by the State Council. Reconstruction need after floods also boosts hopes of a quick recovery in steel demand.

SMM expects futures prices of steel to trade robustly in the near term, driven by macro optimism and an improvement in fundamentals. But investors should remain cautious about prices pulling back after a rally and on negative macroeconomic news. 

Blast furnace operating rates in China retreated (Source: SMM)

Details of the SMM survey:

A steel maker in east China said it has halted production as shipments of raw materials and finished products were disrupted amid floods. Similar situation was seen at another producer in east China, who suspended output by damping down its furnaces. 

A steelmaker in central China maintained stable operations of its blast furnaces and took a cautiously positive sentiment about near-term prices. 

A steel plant in north-east China have kept normal operation of its blast furnaces but put its rolling lines into maintenance. Meanwhile, a steelmaker in south China is running at full capacity without maintenance schedule.