Chinese Steel Industry Output to Go Down by 4-7% till 2017 – Reports

Struggle with sluggish demand and new tougher laws to tackle air pollution in China have put Chinese steelmakers under pressure, which may lead to production curtailment by 4-7% till 2017.

Chinese steelmakers’ tussle with subdued demand and stringent environmental laws pressure has pressurized China’s top steel producing city, Tangshan, to either curtail its production or shutdown plants completely. Tangshan has been on the frontline of campaigns to cut smog and tackle overcapacity. The state has to reduce its annual crude steel capacity by 28 MnT from 140 MnT between 2013 and 2017.

Zhou Junjia, a sales manager at Baifeng Iron and Steel Corporation, stated to media, “There are so many plants, which have to either reduce or stop production.”

As per a survey published this week by the Hebei Province Metallurgical Industry Association, about 26 blast furnaces in Tangshan were closed in July due to overcapacity. Furthermore, a majority of steel processing plants throughout Hebei have either been shutdown or halved their production owing to persistent low price and environmental pressure.

China Iron and Steel Association (CISA) reported that steel consumption in China fell to 4.7% between Jan’15-June’15. Analysts anticipate that it will be rare to see any improvement in steel consumption because of lesser construction activities in the upcoming 2-3 months.

Post production cut in China, iron ore prices have currently recovered to 1-month high at USD 55/MT, CFR China. While, billet offers gained USD 5/MT to USD 320/MT, CFR Bangladesh. Currently in Chinese domestic market, billet is being offered at RMB 1,860/MT, which was RMB 1,800/MT a month ago (prices including 17.5% VAT).

Global Billet Offers

Prices in USD/MT
Source: SteelMint Research