In September, China’s domestic steel market showed volatility riding the dual impact of the continuously surging coke prices and the phased increase in demand, as per Lange Research.
Crude steel production is showing signs of sustained shrinkage thanks to the production cut efforts. According to data from the National Bureau of Statistics, in Sept’21, crude steel output was at 73.75 million tonnes (mn t), a y-o-y decrease of 21.2% while pig iron output was at 65.19 mn t, a y-o-y decrease of 16.1%. Steel output, at 101.95 mn t, saw a y-o-y decrease of 14.8 %.
According to estimates by the Lange Steel Research Centre, the national daily crude steel production in Oct’21 may drop below September levels, to 2.4 mn t.
September output levels
From Jan-Sept’21, crude steel output was at 805.89 mn t, a y-o-y increase of 2%. Pig iron output was at 671.07 mn t, a y-o-y decrease of 1.3% while steel output was at 1.03 mn t, a y-o-y increase of 4.6%.
In September, the average daily output of crude steel, pig iron and steel all showed a continued downward trend. According to data from the National Bureau of Statistics, in Sept’21, the national average daily output of crude steel was 2.458 mn t, a decrease of 8.5% from the previous month; the average daily output of pig iron was 2.173 mn t, a decrease of 5.8% from the previous month; the average daily output of steel was 3.398 mn t, a 3.2% decrease from the previous month.
The monthly crude steel production in September has been below the level seen in the same period in 2019, for two consecutive months. The obvious reasons for this are the production restrictions.
Power curbs hit peak season supply
During the peak demand season of the “Silver Ten” or October, the power curtailment measures have had a significant impact on the supply side, and the sustained release of pent-up demand was not as strong as expected. The domestic steel market in the “Silver Ten” peak season showed a trend of high fluctuations, but the policy-related production pressure is still severe and its impact will be obvious.
According to a survey done by Lange Steel Network, in the first two weeks of Oct’21, the operating rate of the blast furnaces of 100 small and medium-sized steel enterprises nationwide was 76%, a decrease of 3.5 percentage points from September.
Judging from the 10-day production level of crude steel from the large and medium-sized steel companies, the average daily crude steel output of large and medium-sized steel companies has shown a trend of first decline and then increase.
According to statistics from the China Iron and Steel Association (CISA), the average daily crude steel output of key steel enterprises in Oct’21 was at 1,873,200 t, a m-o-m increase of 5.9% and a y-o-y decrease of 13.69%.
At present, the domestic steel market is still in the traditionally peak demand season. However, due to the power curtailment impact, demand may be dragged down. Construction projects and the material use cycle may get extended.
Outlook
According to estimates by the Lange Steel Research Centre, the national daily crude steel production in Oct’21 may drop below 2.4 mn t, among which the daily crude steel production of key large and medium-sized steel companies may drop to about 1.9 mn t.
The impact on demand in the manufacturing sector will be more obvious. From the supply side, because of the current global energy crisis, prices of major energy commodities will remain high, and the effects of the dual curbs of “energy supply” and “energy consumption” will co-exist.
Steel production capacity during the year will be significantly suppressed.
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