Chinese
steelmakers are struggling with falling prices, with mills having to react
quickly to a post-holiday demand trough in China.
Earlier this week, Yunnan steel producers announced equipment
maintenances to reduce construction steel production by 300,000 tonnes in
October due to strong coal prices and weak steel prices (see
Kallanish passim). Yunnan Xianfu Steel's one 1,350 cubic-meter
blast furnace and two 630 c-m blast furnaces have been suspended for five days
starting from 9 October.
On Wednesday, market sources revealed that Yunnan steel mills
are requiring traders to make advance payments before shipping, instead of
directly shipping and paying on receipt as before. Although these traders still
retain the benefits of discounted prices, this shows that steel mills have no
confidence in the current market, Kallanish notes.
Hubei steel mills also announced this week that they would
suspend shipments of construction steel to avoid further losses. Baowu Echeng
Steel, Wuhan Steel and Jinshenglan Steel jointly issued a notice stating that
they will limit the sales price and quantity of steel starting from 10 October.
Later in the week, Jinshenglan announced it would cut 5,000
tonnes of billet production over 8-31 October due to a converter overhaul. It
also conducted a 4-day suspension of a construction steel rolling mill this
week.
Chinese steel mills seem to prefer boosting market confidence
through non-production restrictions, but these measures in fact have limited
impact. More and more steel mills will have to temporarily reduce production to
avoid expanding losses.
Starting from the end of September, Shanxi-based Lvliang
Jianlong, Jinnan Steel, and Taihang Steel announced blast furnace production
restrictions. Subsequently, more Shanxi steel mills have joined the production
cuts in October. Some leading steel giants such as Shougang Jingtang and
Baosteel have also announced blast furnace and rolling mill overhauls starting
this week to ease supply pressure on the market.
Kallanish Asia