In a recently released data for Sep’19, China’s monthly crude steel output have slid to a six-month low. The total output plunged by 5.4% M-o-M basis from 87.3 million tonnes in August to 82.8 MnT, the lowest level since March.
However, does this indicates slow down in country’s steel demand or the production curbs introduced to clear the air in Beijing and other major northern cities for the October the National Day celebrations are the responsible for the same.
Looking at the previous year September month’s crude steel numbers, the same stood at 80.9 MnT and for the first nine months of the year, country’s steel output moved up by 8.4% to 747.8 MnT against the corresponding period of previous year.
This indicates that China’s steel demand remained solid despite weakness in auto and construction sectors. The output of consumer electronic products rose strongly, up by 11.4% YoY in September following on from a softer period between July and August. Similarly, electricity generation also lifted increasing by 4.7% YoY (compared with just 1.7% YoY previously).The construction-related heavy industrial sectors grew more modestly, cement production rose by 4.1% YoY (down from 5.1% in August).
In case of auto sector, car production was again weak with output falling by 6.9% year on year in September and falling for 15 months in a row. This sector has been hit by weakness in consumer demand, in part related to restrictions on shadow banking lenders that had come to dominate vehicle financing in recent years.
Meanwhile, the real estate construction business, a big steel consumer, remains resilient enough to shore up demand for the metal. China’s property investment grew 10.5% year on year in September, boosted by a higher pace of new construction starts, which quickened to a 6.7% rise from a year earlier.
Now if we talk about production curbs, ahead of the National Day celebrations the government announced output cuts in major steelmaking districts in the Beijing-Tianjin-Hebei zone in the final week of September. The weekly utilization rate at blast furnaces in steel mills across the country plunged in late September, falling to 56.2%, the lowest level in more than seven years, according to market reports. The September’s output drop came before the Ministry of Ecology and Environment outlined its annual anti-pollution plan for this year’s winter heating season, setting a target for concentrations of harmful PM2.5 emissions to be cut by an average of 4%.
However, industry experts do not expect a plunge in China’s crude steel output for the last quarter of 2019. In a recently released WSA short range forecast, China’s steel demand is expected to grow by 7.8% y-o-y basis in 2019 but for next year it is expected to fall by 1%.
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