China steel production drops with pollution curbs

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Imports, Metal Prices

The Chinese National Bureau of Statistics has reported that China’s crude steel output fell by 3% to 1.03 billion tons in 2021a. This marks its lowest level since 2016. China remains the largest steel-producing country in the world.

The production downturn brought on by curbs imposed to fight pollution, and a drop in steel prices also meant that iron ore imports into China fell in 2021 by 4.3% as compared to the previous year. China remains the world’s top iron ore consumer, and purchased 1.12 billion tons of the commodity last year, compared with 1.17 billion tons imported in 2020.

So, while China continues to reduce its steel output to meet its carbon neutrality target, global steel supply appears likely to fall.

China steel production drops in 2021

Clearly, as reported by MetalMiner, China’s drive in 2021 to lower its national crude steel output to reduce pollution levels, appears in the data officially released a few days ago. The 3% drop in production comes to about a 35-million-ton reduction.

According to the Bureau, China’s pig iron output in 2021 fell 4.3% on the year to 868.57 MMT, which also served as the first year-on-year decline in six years. In December last year, the country’s crude steel and pig iron production fell year-on-year, with crude steel production down 6.8% and pig iron production down 5.4%, respectively. Both, however, recovered strongly from November, which analysts say appeared in line with market expectations.

Will pig iron and crude steel output continue to increase?

But some analysts believe the country’s pig iron and crude steel output will continue to grow in Jan 2022, too, although electric arc furnace steelmakers have slowed production ahead of the Chinese New Year.  That may cap the growth percentage.

According to this report by Reuters, China, riding on the back of robust steel production, has consumed iron ore at a rapid rate in the first 5 months of 2021. But imports then started to contract on an annual basis as Chinese authorities directed steel mills to cut production to keep the annual target of crude steel output flat. In addition, the slowdown in construction activity meant less downstream demand for steel.

Riding on the back of news that the country’s steel production in 2021 dropped, the country’s largest steelmaker, China Steel Corp recently announced a price cut for its steel products by about 1.62% for domestic delivery next month. Several factors have contributed to the announcement: lower demand, global port congestion, and the appreciation of the new Taiwanese dollar.

Global steel production will likely take a hit in the days to come not only because of what’s happening in China but also because South Korea has also cut its steel manufacturing to curb carbon emissions. Just last month, South Korea’s Pohang Iron and Steel Co closed a furnace with a capacity of 1 million tons per year, China Steel said.

All of this could send global steel prices on a course correction after peaking last quarter, and could rebound after the New Year.

 

 

 

 

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