Chinese steel rebar output rose 3.6 percent in 2017, the first annual growth in three years, government data showed on Monday, as resilient demand and bumper profits in the world’s top producer drove mills to ramp up production.
The output of rebar, used in construction, rose to 17.35 million tonnes in December, up 8.9 percent from a year ago, and jumped to 199.98 million tonnes last year, data from the National Bureau of Statistics (NBS) showed. Output in both 2016 and 2015 fell from the prior year.
Chinese steel mills made a gross profit of as much as 2,000 yuan ($312.57) for every tonne of metal they made in November, the highest in 20 years, and more than the 1,500 yuan from making higher-end flat products. The margins rose because of tightening supplies as the government pushed to cut overcapacity and pollution, analysts said.
China increased efforts to reduce overcapacity last year, bringing the total cuts to 115 million tonnes over the past two years and not far from the total target of up to 150 million tonnes for 2016 to 2020.
Output also rose even after Beijing intensified its campaign to reduce air pollution by ordering industrial plants, including steel mills and coke producers, to slash production in 28 cities starting in the middle of November.
Rebar production also rose because of a shift by mills to install energy-saving electric furnaces that use scrap, and produce more rebar, instead of traditional blast furnaces that consume iron ore.
“Production from electric furnaces has risen in December, and we expect more to come onstream this year,” said Qiu Yuecheng, an analyst with steel trading platform Xiben New Line E-Commerce in Shanghai.
The average daily production of rebar edged down to 559,000 tonnes last month compared with 562,000 tonnes in November, according to Reuters calculation based on NBS data.
China’s average daily crude steel output fell 1.9 percent in December from the previous month, touching the lowest level in a year. Output of medium and wide steel strips in December dropped 10 percent from a year ago to 10.60 million tonnes. Cold-rolled sheet output fell 11.5 percent to 2.78 million tonnes last month, NBS data showed.
Below is a table of steel products output for December and 2017 Steel
December y/y % change 2017 y/y % change products (mln tonnes) (mln tonnes)
Rebar 17.346 8.9 199.977 3.6
Wire rod 11.038 7.7 129.734 -1.7
Cold-roll 2.784 -11.5 32.773 -2.2
ed sheet Medium & 10.596 -10 137.796 5.4
wide steel strips Welded 4.452 -4.4 53.171 -1.9