Added steel supply may tilt balance in China’s market
Liu voiced out his concern in an industrial event in Beijing in early April that the domestic crude steel output had increased rather fast even in the first quarter-a traditionally slack season for steel consumption.
“We should watch closely on our steel output, or the market balance will be broken,” he warned sternly.
Liu’s worry is well justified as China’s crude steel output rose 9.9% on year over January-March to about 231 million tonnes, with the growth accelerated from the 9.2% year-on-year rise for January-February, and it was also 3.3 percentage points higher than that for the whole 2018, according China’s official data released on April 17.
“We have a valid reason to expect a more marked supply increase in the second quarter when more active buying from downstream users will encourage Chines steel mills to produce more for profits,” a Beijing-based steel analyst said.
An official from Shandong-based steel mill confirmed their enthusiasm for high production when queried by Mysteel Global.
“So long as our profit margins are reasonable, we will produce as much as we can to maximize our output, and blast furnaces, nowadays with much larger sizes, are more difficult to just idle the operations,” he said.
Besides, some new steel capacity may be commissioned sometime this year, thus increasing the chances for higher output for the rest of the year, the analyst warned.
China’s steel demand for 2019, on the other hand, is expected to be flat or just grow 1-2% on year from 2018, various market sources tend to agree on the projection on various occasions, as reported.
So far, the trend of higher steel production seems to be rather definite in China, and the weekly rebar production among 137 producers over April 4-10 under Mysteel’s weekly survey, for example, was just inches away from its all-time high of 3.505 million tonnes over October 25-31 2018 since the commencement of the survey in February 2015.
Consequently, rebar price is already under pressure, as even with the steady climb-up since the start of April, the national average benchmark price for the HRB400 20mm dia rebar was at Yuan 4,238/tonne ($632.5/t) including the 13% VAT as of April 17, still Yuan 490/t lower from last year’s high of Yuan 4,728/t on October 31 2018, though the iron ore price hiked $16.9/t over the period to $92.5/t.
Written by Venus Wang, wangyi@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com
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