China: Crude steel output up by 19% y-o-y in Mar ’21, buoyed by increased economic activities

Despite autumn production curbs, crude steel output of Chinese producers aggregated to 94.02 mn t in Mar ’21, rising by 19% y-o-y against 78.98 mn t in CPLY, SteelMint learned from the data released by National Bureau of Statistics (NBS) today.

Major factors that affected the output are as follows-

1.Higher realizations in finished steel segment-China’s domestic finished steel prices have witnessed a significant increase since the beginning of CY ’21. The autumn production curbs announced by Tangshan Government until Mar ’21 and global shortages led to rising prices in both domestic and overseas markets.

2.Domestic economic activities ramped up post- Lunar New Year-The demand from end-user and downstream industries were on a rise after the lull due to the resurgence of COVID cases in early Jan ’21 and CNY holidays in Feb ’21. Also, there were more investments by government bodies in construction and infra projects to boost the economic recovery. Alongside this, there was also a ramp-up in production of automobiles (PV+CV) which has surged by about 72% y-o-y and 64% to 2.462 million units in Mar ’21, as per the China Association of Automobile Manufacturers (CAAM) data.

3.Increase in export volumes-Chinese finished steel exports jumped by 16% to 7.50 mn t in Mar ’21 against CPLY, while it surged by 53% against 4.90 mn t in Feb ’21. China has stepped up its involvement in the export market this year as the demand and price recovery in overseas markets boosted Chinese steel exports. Furthermore, most of the nations across the globe are investing more in construction and infra projects which had been hindered by the pandemic since Mar ’20.

Outlook

The Chinese Government is trying to leash the excess steel capacity while reducing the industry carbon footprint with its recent approach of export rebate cut. This envelops two possibilities- partial reduction to 9% from the current 13% or completely lifting it off. It would be interesting to see how the steel producers respond to this issue with the finished steel prices trending higher both in domestic and overseas markets.