China’s crude steel output touched new highs month-on-month at 97.85 mn t in Apr ’21, notwithstanding the effects of production restrictions. Output rose 4% (m-o-m) against 94.02 mn t in Mar ’21, as per data released by the National Bureau of Statistics (NBS).
On a year-on-year basis, crude steel production in Apr ’21 jumped 15% against 85.03 mn t seen in the corresponding period last year (CPLY).
Major factors behind rise in output:
1.High operational rate at mills-Despite the government’s pledge to curb annual production and reduce pollution, the average daily output in Apr ’21 rose 7.5% to 3.26 mn t over Mar ’21.
2.Firm demand-Steel production in China continued to rise for the second straight month, even though Beijing repeatedly vowed to ensure the country’s full-year output will remain below the 1.065 billion tonnes (bn t) produced last year. Increasing profit margins, stoked by rosy demand and sky-rocketing steel prices, led to increased production by mills.
3.Soaring steel prices-Post the Chinese Lunar New Year holidays, the downstream producers started to replenish steel inventory. The rally in prices is the result of a combination of factors, including strong demand from the construction industry as well as electronic vehicle production, and export rebate cut from 13% to 9% or a complete removal of the same.
For instance, just as the market opened after CNY on 18 Feb ’21, domestic HRC prices in Eastern China stood at around RMB 4,740-4,750/t, which surged to RMB 5,320-5,330/t by Mar-end and further elevated to RMB 5,760/t-5,770/t by the end of April.
4.Increase in export volumes-China posted strong growth in steel exports on good recovery in April, owing to strong demand for Chinese goods amid a brisk U.S. economic recovery and stalled factory production in other countries hit by coronavirus. As per China’s General Administration of Customs (GAC), finished steel export shipments increased by 26% year-on-year (y-o-y) and 6% (m-o-m) in Apr ’21 to 7.97 mn t.
Outlook-
It would be interesting to see how the mills adjust their production volumes in the upcoming months. There seems to be a collision of factors:
- The Beijing government seeks reduction in iron and steel production volumes to reduce environmental pollution by way of axing export rebate of 13% on numerous steel products, enforced at the beginning of May ’21.
- A rise in steel prices both in the domestic and the global market continues to make higher production a viable choice for steel producers.
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