SHANGHAI, Jul 13 (SMM) —On June 28, Gansu’s Provincial Office for Resolving Excess Steel Production Capacity issued a document, requesting local steel companies to ensure that crude steel output in 2021 does not increase on a year-on-year basis.
Anhui’s Iron and Steel Industry Resolution Office held a symposium on June 29 discussing about the reduction of crude steel output, requiring crude steel output to be lower than that of 2020.
SMM Ferrous Team says… This is the first government document that clearly requires the cutting of crude steel output. SMM learned that participating steel mills filled in production data (steel output) in H1 2021 and planned output in the second half of the year during the meeting at Anhui.
According to the data from the Bureau of Statistics, crude steel output in H1 2020 stood at 499 million mt, and the market generally expects that crude steel output to reach 560 million mt in H1 2021. If the goal of output cut is achieved, crude steel output in H2 will be reduced by at least 60 million mt, which theoretically affects the demand for steel scrap by 12 million mt.
For electric furnaces and converters of the same volume, the amount of steel scrap used by electric furnaces is 3 to 4 times that of converters. If electric furnaces do not suppress production, it will be profitable to steel scrap. However, considering that most electric furnace plants are private enterprises, the state cannot limit state-owned enterprises without private enterprises, and according to the list of participating steel mills in Anhui, companies with without blast furnaces are also included. Therefore, all places should reduce the output. In this case, the amount of steel scrap used by electric furnaces will also be reduced.
Generally speaking, in the context of carbon neutrality and emission peak, the relevant national policies are long-term positive for steel scrap. However, if the steel mills strictly implement the production restriction policy in H2 2021, demand of steel scrap will face a decline in the near term.
