Posted on 30 Sep 2021
Over 70% of the steel rolling mills in Jiangsu province, China’s second largest steel producing province after North China’s Hebei, are being affected by ongoing power rationing among heavy industries throughout the province, and the production disruptions are unlikely to be fully lifted before October 7 at the earliest, according to a local industry association.
Steel producers in Jiangsu, including both blast-furnace and electric-arc-furnace mills, together with steel re-rollers, were ordered to scale down production beginning September 8, as part of efforts to reduce the province’s energy consumption and energy use intensity, as Mysteel Global reported.
The suspension of the local rolling lines could slash finished steel supply in the province by as much as 3 million tonnes (over the September 8-October 7 period), according to a Wechat post from the Jiangsu Iron & Steel Industry Association (JISIA) on September 26, the day the association convened an internal meeting to evaluate the impact of power rationing campaign on local steel mills’ production and operations.
The JISIA membership draws upon nearly 600 steel mills, upstream and downstream enterprises, as well as research institutes inside and out of the province, according to the introduction on its official Wechat account.
Last month, the province’s finished steel production totalled 12.6 million tonnes, or 12% of China’s total.
“In the near term, (the supply reduction) is unlikely to lead to a shortage of supply, but the measure has already seriously impacted the local mills’ normal order of production and operation,” JISIA stated in the post.
The rolling lines currently under suspension produce a variety of steel items but those most-affected are long steel products for construction use, such as rebar and wire rod, as Jiangsu is a major production hub for construction steel, according to a senior industry source based in the province. He has already noted the “abnormal movement” of prices of these products as a result of the supply reduction, he told Mysteel Global.
As of September 28, the HRB400E 20mm rebar price in Jiangsu’s capital of Nanjing had risen by a total of Yuan 450/tonne ($69.8/t) from September 8 to Yuan 5,920/t including the 13% VAT, or just Yuan 300/t lower than its historical high of Yuan 6,220/t recorded on May 10 this year, according to Mysteel’s assessment.
The senior analyst believed that steel prices will inevitably climb further due to the supply reduction but cautioned against exaggeration. “A large jump seems unlikely, as tight supply and high prices will in turn, constrain demand,” he remarked, noting that downstream users have already been pressured by high input costs including those of steel and cement. Production of cement is also being affected by power rationing, Mysteel Global notes.
Source:Mysteel Global
