SHANGHAI, Aug 6 (SMM) — Operating rates of blast furnaces at steel mills fell 0.1 percentage point on the week and 0.9 percentage point from a month ago to 81.1% as of August 5, SMM survey showed.

Steel output has reached a low level, but the production restrictions remain tight. The rebar output declined significantly, as the steel mills chose to mainly produce HRC for the higher profits. Operating rates of blast furnaces are expected to stay stable next week.

Last week’s Political Bureau meeting delivered the instruction to ensure supply, stabilise prices, and crack down on the speculations or over reaction on carbon reduction. The market worried about the shift in the policy of crude steel production cut, but the blast furnaces continued to reduce production. The output of EAF mills was limited due to the strict power curtailment in south China. The average daily crude steel output of key steel mills fell significantly by 3.98% to 2.11 million mt in late July, a record low in 13 months.

In the short term, the market is not sensitive to the impact of production cut amid the weak demand and sweeping pandemic. Steel prices also start to fluctuate for adjustment amid lower iron ore prices.

In the medium and long term, demand will pick up in September, and output reduction may lead to a shortage of supply in the market, especially the rebar supply. Bulls may enter the market at low prices.