China daily steel output rises to near record high in September


China’s daily crude steel runs rose 1.3 percent in September to the highest level in three months, data from the country’s statistics agency showed, suggesting mills were still close to full capacity despite weak demand and a steep slump in prices.

Persistently high steel output from the world’s top producer could further drag on Shanghai rebar futures, which sank 13 percent last month, and also dent spot iron ore prices that are reeling from a supply glut as global miners of the steelmaking ingredient push ahead with expansion plans.

China produced 67.54 million tonnes of crude steel in September, down 2 percent from the previous month and flat compared to the corresponding month of 2013, data from the National Bureau of Statistics showed on Tuesday.

But the daily output rate rose to 2.25 million tonnes from 2.22 million tonnes in August, driven by a slight improvement in industrial activity. This was the highest since June when output touched a record of 2.31 million tonnes per day.

“The 1.3 percent increase matches the recovery in electricity consumption versus August as well as the slightly better monthly PMI results,” said Melinda Moore, analyst with Standard Bank, referring to data showing growth in China’s manufacturing sector held up in September.

China’s total crude steel output is expected to reach around 820 million tonnes this year, short of its overall capacity estimated at 1.1 billion tonnes but still outstripping demand which has been hit hard by a sluggish economy.

A slowdown in China’s economic growth – most recently to the lowest level since the 2008/09 global financial crisis – has shrunk steel demand in China, aggravating overcapacity problems in the sector.

While there are no signs that conditions will improve in the final quarter of the year, steel firms have continued to pursue a strategy based on outlasting rivals.

“Mills prefer market share maintenance, hoping the strong will survive and the weak will fall away,” Moore added.


Persistent overproduction in the world’s biggest steel market has driven prices to record lows this year, and despite a surge in imports, iron ore prices .IO62-CNI=SI have also slumped around 40 percent since the beginning of 2014.

“We are about to head into the seasonal soggy winter steel demand period, with monthly demand volumes potentially to drop by 5 million tonnes, so there is little upcoming joy for raw material suppliers,” analyst Moore said.

Crude steel output over the first three quarters of the year reached 618 million tonnes, up 2.3 percent on year, the National Bureau of Statistics said.

Based on September daily runs, output stood at 821.25 million tonnes on an annualised basis, up 5.4 percent from the official 2013 rate, according to Reuters calculations, which do not take into account a 3.7 percent upward revision to last year’s January-September production data.

While production has remained close to record highs, the China Iron and Steel Association (CISA) has said that apparent steel demand actually fell in the first eight months of 2014, with all additional production over the period diverted to the export market.

Mounting losses and financing problems have already forced a number of steel producers to halt their operations, but the impact on overall output has been negligible, with other mills stepping in to fill the gap.

October production also appears to be holding up, with CISA data showing daily output from large steel mills reached 1.804 million tonnes in the first 10 days of the month, up 0.8 percent from Sept. 21-30.

However, steel product output fell 11.4 percent over the period, with several mills taking advantage of the Oct. 1-8 National Day holiday to overhaul their rolling facilities.

Many in the sector are now hoping that efforts to guarantee air quality during the Asia-Pacific Economic Cooperation (APEC) summit in Beijing in early November will serve to reduce supply and provide a short-term boost to steel prices.

All steel production within a 100-kilometre radius of Beijing is likely to be suspended during the summit, industry consultancy Mysteel said.

Substandard facilities within 200 kilometres of the capital – which would cover the major steel producing city of Tangshan – could also be closed over the Nov. 1-12 period.

Source from : Reuters