MYSTEEL: Abnormal decline predicted for China's hot metal output in Aug

The forecast is based on Mysteel's new survey of the production schedules of furnaces at these 247 mills. Specifically, five BFs with a total pig iron capacity of 25,500 t/d will be brought back online from maintenance this month, while ten with a larger capacity of 40,900 t/d will be blown off for overhauls.

In the past two years, hot metal output at Chinese steel producers has typically risen in August as the month preludes the autumn peak season for steel demand over September-October, as shown in Mysteel's tracking data.

However, this August domestic hot metal output is expected to slip, as mills are mired in severe losses and will have little inclination to ramp up production.

As of August 2, the average profit ratio enjoyed by the 247 mills had plummeted to just 6.49%, the lowest level in a decade, while their hot metal output over the July 26-August 1 week was already down by a marked 1.2% on week to average 2.37 million t/d.

The main reason for the worsening profitability among mills is their rush to destock their rebar inventories at lower prices as China transitions to new quality and performance standards for the long product from next month, as reported.

Chances are that mills could cut rebar prices further to entice sales before the new standard takes effect on September 25, the report noted, which means mills may suffer far deeper losses in the month ahead.

Consequently, actual hot metal output in August could be even lower than estimated if poor margins compel mills to carry out more temporary maintenance stoppages for BFs during the month, the report warns.  

Written by Irene Zhuang, zhuangailing@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com