China produced 1.05 bn t (1,054.83 mn t) of crude steel in CY ’20, up by 6% from the previous high of 996.34 mn t last year.
Further, in Dec ’20, output volumes were at 91.3 mn t, higher by 4% compared to 84.2 mn t in Nov ’20, and up by 8% annually, according to data from the National Bureau of Statistics (NBS) released today.
Major factors that affected the output are as follows-
- Increased capacity utilization-The reopening of the market after the first wave of COVID-19 in early Apr ’20 and subsequent increase in both domestic and overseas demand led to a ramp-up in production volumes by the mills.
- Higher exports volumes in CY ’20-Finished steel export volumes peaked in March and Apr ’20 period with 6.48 mn t and 6.31 mn t respectively. However, emergence of COVID-19 on a global scale led to lower exports. Export volumes started picking up post Aug ’20 when most of the countries had started to recover from the pandemic.
- Robust demand in the domestic market-In China, domestic buying remained active as supplies remained tight owing to the frequently announced production cuts. Also, strong futures market and higher price realization in domestic sales prompted Chinese steelmakers to prioritize domestic supplies over exports.
- Stimulus packages-The Chinese government rushed out with stimulus packages with the easing of the first stringent lockdown. In late May ’20, the government pledged a RMB 4 trillion worth of cost cuts to support the country’s struggling factories and merchants. This package was the largest economic rescue plan and included tax exemptions, lower bank interest rates and waived contributions to social welfare funds as well as reduced prices for utilities such as electricity.
Outlook
The crude steel output is expected to decline this year on production cuts announced in China. Also softening domestic demand on volatile futures may cut crude steel volumes in upcoming year
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