Production of hot-rolled coil among the 37 Chinese flat steelmakers Mysteel canvasses regularly declined for a second week last week, plunging by 112,000 tonnes or 3.5% on the week to 3.1 million tonnes during October 18-24, the lowest level since late September 2018, according to Mysteel’s latest weekly study. Market sources attributed the decline to steelmakers’ softening enthusiasm for maintaining production.
In parallel, the rolling capacity utilization rate among those steelmakers also slipped by 2.8 percentage points on the week to 78.24% on average during the same period, the survey showed.
“Some flat steelmakers opted to conduct maintenance on their hot strip mills, given the high levels of production they’d been maintaining for a long period, as well as the weakening prices,” a Shanghai-based market insider said.
Anyang Iron and Steel Group, for example, had opted to halt the operation of one 1,780mm hot strip mill from October 14 – due to insufficient supplies of hot metal – and when the HSM might be restarted remains unclear, Mysteel Global noted. One of Anyang Steel’s blast furnaces, a 2,800 cu m unit, has been idled since late September under production curbs ordered by the local government to help control pollution.
Given the limited molten iron supply currently, the company opted to reduce production of HRC, the steel item where profit margins are rather low at the moment, according to the market insider.
Nationwide, the decline in supplies of hot coils has helped to mitigate the pressure on stocks, with HRC inventories at traders in China’s 33 cities as of October 24 dropping 180,100 tonnes or 7.6% on the week to 2.2 million tonnes. At the same time, HRC stocks at the 37 surveyed mills also decreased 50,200 tonnes or 5.3% on the week to 893,200 tonnes as of October 23, Mysteel’s data showed.
“Demand remains stable for now, but the pessimism and cautiousness in the market can’t be changed,” another Shanghai-based steel analyst commented. “This is preventing prices from increasing, though traders would not make further concessions on prices, given the meager profits they’re earning currently.”
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