Non-CISA members’ crude steel output surges 24% in H1
Among China’s added 44.3 million tonnes of crude steel output in H1, the non-member steel mills contributed to 56.2% or 24.9 million tonnes, Mysteel Global understands from the CISA statistics.
Gao also disclosed that the non-member mills produced 128 million tonnes of crude steel over January-June, which was far more than the 75 million tonnes of crude steel output they produced in the H2 of 2017 after the illegal induction furnace capacity had been eliminated from the Chinese market.
For CISA member mills, their steel output grew 5.6% on year, which was far below the countrywide level.
It is worth understanding, therefore, “which are these (non-member) mills? Are all their steel capacities legitimate? Have they met all the necessary industrial and environmental policies and guidelines?” he probed.
China’s high crude steel output growths since 2018 especially the more alarming 10% for the first half of 2019 have caught the steel communities in and out of China by surprise, which has renewed the market concern on oversupply, and this has also lent strong support to the continuing surge in the global ore price, Mysteel Global noted.
More importantly, the high steel output and high raw material prices have posed serious threats to the profitability of the Chinese steel industry, with some mills thrown into lossmaking again by the end of June, market sources said.
CISA’s member mills posted that their profit fell 30.7% on year despite their sales revenue grew 10.9% on year, and their profitability for their core steel business fell to 5.1%, being two percentage points lower than a year ago or below the average profitability for the country’s all industrial sectors.
China will be under the consistent risk of steel oversupply despite the elimination of 150 million tonnes/year steel capacity over 2016-2018 and the induction furnaces, as the country is with another 200 million t/y new capacities under the planning through old-for-new capacity swaps, according to Gao.
“All the efforts in excess steel capacity removal will be wasted if we loosen the control and do not set up a long-time system to prevent the recurrence of induction furnace capacities or newly-added capacities,” he warned.
Written by Venus Wang, wangyi@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com
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