Crude steel output of Chinese producers aggregated to 174.99 mn t in Jan-Feb ’21, rising by 13% against CPLY, SteelMint learned from the data released by National Bureau of Statistics (NBS).
The production was recorded at 155 mn t in Jan-Feb ’20, which was impacted by the first citing of COVID-19 contagion infection case in late Dec ’19 in China.
The increase in production was supported by robust downstream demand from the construction and manufacturing sectors. However, the Chinese Government has announced production curbs to reduce carbon emissions in the near term.
Major factors that affected the output are as follows-
1.Ramp-up of blast furnace utilization rates-The capacity utilization of 163 major blast furnaces was above 82% in Jan-Feb ’21 as surveyed by MySteel.
2.Domestic construction activity ramped up post-Lunar New Year-The demand from the construction sector rose as China’s infrastructure projects and real estate market surged 36.6% and 38.3%, respectively, in the first two months of CY ’21. Further, China’s manufacturing sector investment picked up rapidly after being hit by the coronavirus pandemic to soar 37.3% in Jan-Feb ’21 from the same months in CY ’20, which could also be factored in for the growth in output volumes.
3.Increase in export volumes on demand from overseas markets-Global economies had started reviving by the end of CY ’21 with the higher influx of government investments. The Chinese finished steel exports had slid to a 5 year low of 3.68 mn t in Aug ’20, after which it has shown a gradual recovery. In Jan-Feb ’21, export volumes surged by 30% to 10.14 mn t in contrast with 7.80 mn t in CPLY. Thus, higher volumes of exports and improved domestic consumption propelled Chinese steel mills to increase output.
Outlook-
On one hand, the government is announcing production curbs to curtail emissions and air pollution, while on the other hand, the steel market is showing green-shoots of growth with higher government investments in key sectors and development projects across the globe. It would be interesting to see how these factors shall impact the Chinese steel manufacturers’ performance in the near-term.
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