Posted on 23 Apr 2021
China’s Ministry of Industry and Information Technology (MIIT) reiterated at a press conference on April 20 that the country's crude steel will be cut this year and it has been formulating execution plans, which, to some extent, cleared the mist in and out of China on whether steel output cut for 2021 is still on China's agenda.
At the press conference, Huang Libin, MIIT’s spokesman, stated that the ministry has been reviewing the results achieved in steel capacity elimination, and working on the steel production cuts, though he did not share any more details.
Over January-March, China’s crude steel output soared by 15.6% on year to approximately 271 million tonnes, with the pace faster than the 12.9% on-year gain over January-February, which has deepened the market doubt both at home and abroad on how serious MIIT is about the national steel output cuts recently.
Besides, little action has been taken by MIIT since its mentioning on lower steel output for 2021 in late January, nor any concrete and detailed plans have been released so far.
“So far, no concrete measures regarding which mill to cut and by how much have been heard of, so the domestic steel market sentiment has changed, and the pessimism is no longer as prevalent as before,” an iron ore futures analyst from Southeast China’s Fujian province commented, and “some even guess that the intention is no longer there,” he said.
Overseas market sources have been closely watching the Chinese authorities’ move on national steel output cuts too and many are just as doubtful.
“I have been waiting for China’s detailed and concrete measures on cutting its steel output, but so far it is not happening, and the Q1 steel output grew by 15.6% on year, do you think it will still happen or it is no longer possible?” an Indian market source said, and China has taken no action on adjusting the steel export tax rebates either though the speculation has been rife in and out of the country, he added.
“If China does not keep its steel inside the country, it will make it even harder to reduce the steel output,” he pointed out.
A second Indian market source also challenged the feasibility of China’s call for lower steel output.
“Steel demand both in China and overseas has been so strong, and prices have been growing globally, how will China be able to cut or trim its steel output, does not Beijing worry that this will lead to even higher steel prices?” he said.
Huang did note that prices in the steel, nonferrous and oil and petrochemical industries have been rising since the end of last year, mainly due to the three factors including the surges in their respective raw materials such as iron ore and copper concentrates, comparatively supply tightness due to the strong recovery in demand from respective downstream industries and financial characteristics of some nonferrous metals and petrochemical products.
Bulk commodities prices surges have indeed squeezed the margins of related downstream enterprises, he admitted, but the impact is still very much manageable, he added.
Such prices surges are “sudden” and “short-time” instead of being sustainable, and the ministry will cooperate with the other related governing bodies to intensify the monitoring and surveillance over the prices, to stabilize the market sentiment, and to synchronize market information timely to avoid panic stocking up and to encourage hedging via futures, he summarized.
Source:Mysteel Global
