China aims to further reduce steel output

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The world’s largest steel producer and exporter, China, is actively contemplating adding more curbs to halt environment pollution which, most likely, will reduce its steel output and dampen exports.

That’s good news for some of China’s neighbors steel-producing rivals, India and Japan.

Stop obsessing about the actual forecasted steel price. It’s more important to spot the trend

Steel cuts

Chinese steel factory

fanjianhua/Adobe Stock

The China Iron and Steel Association (CISA) warned on its Wechat channel last Sunday of impending cuts in crude steel output along with government-led environmental checks.

Daily crude-steel output at major mills fell 5.6% in the first 10 days of July from June, Bloomberg reported. These were at steel plants in Shanxi, Hubei and Hebei provinces, and mills including China Baowu Steel Group and HBIS Group.

This was enough to send Chinese ferrous futures tumbling, Reuters reported. On Monday, for example, steel rebar and hot rolled coil both plunged some 6%. The most-traded construction rebar contract  on the Shanghai Futures Exchange for October delivery fell by as much as 6.4% to 5,367 yuan ($829.89) per ton.

CISA has also warned that Chinese steel exports may drop after the country imposed higher tariffs on overseas shipment.

Domestic availability

Some reports coming out of China indicate the country is ensuring adequate availability of steel for domestic users by discouraging exports. It is also considering imposing more tariffs on steel exports of 10-25% on steel products, including hot rolled coil.

Since May, China has already revoked the rebates on export taxes and raised tariffs on some steel products to keep more steel within China.

All this was happening even as a fresh report by the World Steel Association said China remained a global leader in steel production in June. China registering 1.5% year-over-year growth in output at 93.9 MT compared to 91.6 MT in the same month last year. However, China’s output fell by 5.6% from May 2021 to June 2021.

China’s immediate neighbor, India, registered a 21.4% year-over-year rise in its crude steel production to 9.4 million tons in June. India’s crude steel output reached 6.9 million tons in the same month a year ago.

Steel experts in India say the country is poised to see a major uptick in the domestic consumption of steel after demand picks up as the COVID-19 pandemic comes under control, and the economy opens up. With demand slightly picking up and domestic steel prices continuing to stay at huge discounts to global rates, primary steel producers may be prompted to raise product prices for August, according to a report in the Business Standard.

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