A few
Chinese blast furnace mills are preparing to stop finished steel production
lines next month on lackluster demand in domestic and seaborne markets, an
S&P Global Commodity Insights survey of 18 major mills across different
regions in the country showed July 28.
A tight
rebar supply-demand balance has been reached on account of lower production and
weak demand.
“Most of the
production cuts were temporary and by mill maintenance,” said one of the
Eastern China mill sources, adding that when blast furnaces mills’ margin
recovered, the speed of the production volume increase will be fast and strong.
“HRC demand
in China was weaker than rebar. Some mills might switch their molten iron from
producing HRC to rebar,” said a Shandong-based mill source.
Platts
assessed Beijing’s domestic rebar spot price at Yuan 4,010/mt ($592/mt) ex-stock
actual weight July 27, down Yuan 206/mt, compared with the last S&P Global
survey published July 6.
Eight mills
part of the July 28 survey had cut production by either idling blast furnaces,
lowering production volume, or stopping production lines, compared with 11
mills on July 6.
Among the
eight mills, one in Northeast China continued to cut production by mill
maintenance, as part of the yearly plan which has been set in early this year.
An Eastern China mill is maintaining one blast furnace as part of its yearly
plan. A mill in Jiangsu, East China, said they have continued to decrease
output on rebar, wire rod and HRC due to weak profits since the survey which
was done on May 27, as part of the mill’s yearly plan. The mill source said the
mill might not increase production unless the margin turned positive.
Besides the
above three mills, the other five mills in eastern, northern and northeastern,
all belong to unplanned production cuts.
A Northern
China mill is cutting production due to negative margins. One in Northeast
China said that the mill has stopped three small blast furnaces and four HRC
production lines. An Eastern China mill is maintaining all the finished steel
production lines till Aug. 6. The other two mills cut production by unplanned mill
maintenance.
“Most mills would not choose to take the initiative to cut crude steel
production,” said an eastern China mill source. Chinese mills have concerns, as
lowering output now might reduce their 2023 production amid the government’s
climate controls.
Two mills in
the survey told S&P Global that they plan to stop several finished steel
production lines or switch to producing different products in August. One
expected that it will affect a total of 140,000 mt of finished steel output in
August, including flat steel and wire rod.
Chinese
domestic rebar margin fell to a negative $21.39/mt July 27 compared with a
negative $40.57/mt July 5 and has been in the negative territory since June 13,
according to an analysis of mill margins by S&P Global.
Separately,
some electric arc furnace mills mills might restart due to higher production
margin in EAF, while most are yet to run the furnaces as the scrap is hard to
collect.