Steel prices to rise further amid positive fundamentals

SHANGHAI, Mar 25 (SMM)—Operating rates of blast furnaces (BFs) at Chinese steel mills dropped 1.1 percentage points from a week ago and 2.3 percentage points from a month ago to 84.5% as of March 25, an SMM survey showed. The government of Tangshan re-issued the draft "Notice on Production Restriction and Emission Reduction for Iron and Steel Companies” on March 19. The draft required that from 0:00 on March 20 to 24:00 on December 31, integrated steel mills in Tangshan (except Shougang Qian'an and Shougang Jingtang) shall be subject to differentiated production restriction and emission reduction measures. SMM learned that many local enterprises have already implemented environmental protection and production restriction policies, which led to a continued decline in BF operating rates this week. 

Operating rates of blast furnaces (BFs) at Chinese steel mills

The draft required seven steel makers to restrict production by 50% from 0:00 on March 20 to 24:00 on June 30, and by 30% from 0:00 on July 1 to 24:00 on December 31, and the remaining 16 steel makers were required to reduce production by 30% from 0:00 on March 20 to 24:00 on December 31. According to SMM calculations, from March 20 to June 30, the average daily molten iron output is expected to drop by 121,000 mt, and from July 1 to December 31, it will decline by 97,200 mt. Other regions are also expected to impose such environmental restrictions against a backdrop of the carbon peak and carbon neutrality. Jiangsu may be the next area to focus on restricting production. The Ministry of Industry and Information Technology said that it will introduce more stringent capacity replacement policies in the near future. Steel supply will shrink significantly in the near term. Meanwhile, demand has recovered impressively, with daily construction steel trading volume reaching more than 280,000 mt. Positive fundamentals are likely to support steel prices.