CISA: China’s steel demand to rebound gradually in Q2
The statement was made by Luo Tiejun, CISA’s vice president, at an online press conference on Saturday. The press conference, this year’s first, was convened to inform the public about the domestic steel industry’s performance and the problems being faced, according to the post.
The return to work of major steel consuming sectors including construction, machinery, automaking, shipbuilding and white goods manufacturing after the Chinese New Year (CNY) holiday ended on February 2 was delayed due to the COVID-19 outbreak, Luo explained. As a result, domestic steel demand in Q1 this year is foreseen to decline sharply compared with the same period last year, he said.
China has renamed the disease caused by the novel coronavirus COVID-19, adopting the title created by the World Health Organization.
In the short term, the high steel inventories are hardly likely to be depleted by downstream users, Luo indicated, predicting that steel stocks at both steel mills and retail warehouses will continue to increase.
Yet, “downstream demand will restart with the recovery of the epidemic… and (the epidemic’s) impact on the steel industry will gradually reduce,” Luo stated. “With the support of policies introduced for (China to achieve) overall well-off and steady growth, steel demand is expected to recover gradually from Q2.”
As of February 20, resumption of work in China’s machinery industry had exceeded 60%, that in automaking surpassed 85% and the resumption in shipbuilding and light industry was over 70% and 50% respectively. Region-wise, industrial resumption in economically-advanced regions such as South China’s Guangdong, East China’s Jiangsu and Shanghai all exceeded 50%, CISA noted.
Meanwhile, due to the high steel inventories and reduction in demand, as well as COVID-19’s impact on the distribution of both raw materials and finished steel products, Chinese steelmakers have been slowing down their production, with the extent of the scale-back predicted to strengthen in the near term, CISA maintained.
As of February 21, 73 blast furnaces in 47 mills under CISA’s survey were halted for maintenance or were simply reducing output, reducing molten iron production by 210,000 tonnes/day, according to CISA.
“Currently, some mills’ output has remained high, because they (mostly flat steel or steel strip producers) need to deliver orders signed before the CNY holiday,” CISA explained.
During the first ten days of February, daily crude steel output among 97 major steelworks members of CISA reversed down after the continuous rally seen last month, with the tonnage down 53,500 tonnes/day or 2.7% from the average level for late January to reach 1.94 million t/d, as Mysteel Global reported.
Given the scale of the slowdown of domestic mills’ production, CISA estimated that the reduction of iron ore supplies due to global miners Rio Tinto or Vale’s lower shipments will have a very limited impact on China’s iron ore supply-demand balance.
Rio Tinto cut its annual iron ore shipment to 324-334 million tonnes, affecting 10,000-15,000 t/d of molten iron output, which is little against the 210,000 t/d output that Chinese steel mills are reducing, according to CISA.
Written by Olivia Zhang, zhangwd@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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