Operating rates of blast furnaces across Chinese steelmakers lower at 87.7% on week, steel prices likely to post slower declines

SHANGHAI, Jan 21 (SMM) - Operating rates of blast furnaces at Chinese steelmakers decreased sharply this week, as the transportation of raw materials in Hebei Province was affected by the pandemic, and some steel plants were forced to cut production. An SMM survey showed that the average operating rate of BFs at steel mills in China fell 0.7 percentage point from the prior week and fell 0.44% from the previous year to 87.7% as of January 21. 

Hebei Province has implemented closed management of Shijiazhuang, Xingtai, Langfang and other places since the last week. People and vehicles are not allowed to go out unless necessary, and transportation has adopted the most stringent control measures. These three regions are important steel production areas, and their output accounts for about 11% of Hebei’s total steel output. The control of the pandemic has caused certain disturbances on the steel supply side. At the same time, the local transportation costs in some areas increased due to Hebei Province’s restrictions on inter-provincial traffic, which gave some support to prices. However, it should also be noted that the pandemic control will have a certain negative impact on the demand side. Meanwhile, the current demand for long steel in other northern regions has basically stagnated, and the accumulation of steel stocks has accelerated, putting pressure on steel prices.

The current inventory accumulation has not exceeded expectations, and traders are generally optimistic about the spring market. In addition, the Spring Festival is approaching, steel mills without blast furnaces are expected to reduce production, and the supply will likely shrink in the following weeks. Combined with iron ore restocking demand supporting the price and the 14th round of increase of coke prices, the supply gap is still difficult to effectively alleviate. Biden was sworn in on Wednesday. The market has expectations for its possible $1.9 trillion stimulus plan. Market sentiment will be relatively optimistic in the near term, which is likely to support steel prices.

Operating rates of blast furnaces at Chinese steelmakers

Data source: SMM Iron & Steel