Posted on 21 Mar 2024
Crude steel output in China, the world’s dominant producer, is poised to slide in March from year-ago levels as mills delayed restarts or started maintenance after the February Lunar New Year holiday amid lacklustre demand, analysts said.
Output in March, which typically sees strong demand as construction season ramps up, is widely forecast by analysts to fall, with consultancy Lenge Steel predicting a 12.6% drop and China Futures expecting an 11.21% decline from last year’s 95.73million metric tons.
China manufactured 167.96 million tons of crude steel in the first two months of the year, up 1.6% annually, defying widespread market expectations for a decline.
“We expect March output to fall on-year as downstream demand has undershot expectations and steelmakers therefore showed little willingness to resume production after the week-long Lunar New Year holiday break,” said Chu Xinli, a Shanghai-based analyst at China Futures.
Construction progress on some major projects has been slowed by insufficient capital, limiting steel demand, said Ge Xin, an analyst at consultancy Lange Steel.
“Issuance of special bonds, which are typically used to fund infrastructure projects, has been relatively slow so far this year,” Ge said.
The amount of new special bonds issued in January-February fell 70% annually, accounting for around 10% of the total annual quota of 3.9 trillion yuan ($541.71 billion) for this year by the government, Mysteel said in a March 5 report.
Meanwhile, provincial steel associations in Jiangsu, Shandong, Guangdong, Shanxi and Sichuan last week called for steelmakers to voluntarily cut production, citing losses amid falling prices due to weaker-than-expected demand recovery.
Earlier this month, Yunnan province said local construction steel supply would be reduced by around 500,000 tons as several mills planned to cut output.
Steelmakers in Tangshan in north China’s Hebei province, China’s top steel hub, were subject to environmental curbs that started March 13 and were lifted on Saturday.
According to a March 15 note from Mysteel, 11 steelmakers had announced equipment maintenance plans this month for periods ranging from seven to 60 days.
“Normally, mills won’t conduct maintenance in a peak demand month and this rare move only mirrors subdued demand,” Chu from China Futures said.
Some analysts predict improvement in April.
“There will be a wave of restocking from downstream sectors ahead of the May Day holiday, which will help steel mills destock,” said Cai Yongzheng, director at Jiangsu Fushi Data Research Institute.
Source:Reuters
