China’s crude steel production from January-June 2024 (H1) fell slightly by 1.1% y-o-y to 530.57 million tonnes (mnt) against 538.28 mnt in same period last year, as per National Bureau of Statistics.
In June 2024, production inched up by 0.2% y-o-y to 91.61 mnt compared to 91.11 mnt in June 2023. However, crude steel production fell by 1% m-o-m against 92.86 mnt a month ago. The decline is attributed to slow demand which was likely caused by a decrease in construction activity due to hot summer weather and heavy rainfall in the southern regions.
The daily average crude steel production stood at 3.054 mnt reflecting an increase of 2% m-o-m compared to the previous month.
Factors affecting output
Increase in Chinese steel exports
China’s steel exports for H1CY’24 increased by by 24% y-o-y to 53.40 mnt as compared to 43.88 mnt in the same period last year. China’s steel mills are struggling with weak domestic demand and have ramped up exports. However, festive holidays, slow trade, and even extreme weather have further dampened domestic sales.
Weak domestic demand
A slowdown in real estate investment has hampered the overall recovery in steel demand. This has led to recurring imbalances between supply and demand, causing steel prices to dip. However, the price of steelmaking raw materials dropped sharply, Chinese steelmakers faced pressure due to extreme weather conditions. Additionally, with high production cost and weak demand many steel mills are stuck with large inventories.
Outlook
China’s crude steel production is expected to remain stagnant or even decline slightly in the near term. The key factors are weak domestic demand and the balancing act with steel exports. Government policies and weather can also impact demand, but a substantial increase in production is not expected without a significant improvement in domestic steel consumption or a major shift in government policy.
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