China’s crude steel production for April 2024 decreased by 7.2% y-o-y to 85.94 million tonnes (mnt) as compared to 92.63 mnt in April 2023, as per data provided by the National Bureau of Statistics (NBS). Moreover, the same edged down by 3% m-o-m as compared to 88.27 mnt in March 2024.
During January-April 2024, crude steel production fell by 4% reaching 342.17 mnt against 357.05 mnt in January- April 2023.
Factors behind drop in production
Production cut: In April, steelmakers reduced their crude steel production due to weak demand from customers and declining profitability. Moreover, steel prices have been falling steadily, effecting steelmaker’s profits and dampening market confidence.
Furthermore, despite recent drops in crude steel production this May, output is expected to stabilise as hotter weather arrives. This is because high temperatures typically dampen demand for steel.
Steel demand: Steel prices in China did not rise as much as expected after the Labour Day holidays in early May. This is because demand for steel has not improved as anticipated, despite recent stimulus policies by the Chinese government. These policies include issuing ultra-long sovereign bonds and relaxing restrictions on the real estate industry in some regions.
Outlook: China’s crude steel production in the short term appears to be headed for a slowdown. However, the impact of government stimulus on demand and any potential production curbs remain uncertain. If demand recovers as anticipated due to stimulus measures, production might see a modest rebound in the latter half of 2024. However, a significant and sustained increase seems unlikely without a major improvement in the construction sector.