Last Update: 23/05/2012 10:56:32
China’s crude steel production over the first ten days of May set a new all-time record high of 2.0453m tonnes/day, according to a China Iron & Steel Association (CISA) estimate published on Friday. This was up 0.5% from the daily average in the last ten days of April and up 1.3% over average daily production in the whole of April. The CISA estimate indicates that Chinese steel mills have not yet slowed their production, even though steel prices and demand have been trending downwards since late April, a Shanghai-based analyst said. Prices of domestic hot rolled coil and rebar have fallen by RMB 150-200/tonne ($24-32/t) and RMB 170/t respectively since the beginning of May. Traders in Shanghai and Lecong told Platts Steel Business Briefing that HRC inventories have recently begun to swell due to poor buying. Sources at major mills in eastern and western China confirmed they are not planning to curb output for now despite rising stocks. The eastern mill source said slab inventories at its hot strip mill are already twice usual levels, in part because of poor buying for HRC and also because the mill hopes that HRC prices will rebound, enabling it to quickly turn slab into coil. That steelmakers cannot tame output for the moment is understandable, the Shanghai analyst said. Mills are under pressure to turn raw materials stocks into saleable steel products before iron ore prices dip further and take steel prices down with them. Most producers are currently using iron ore secured prior to April, and since then iron ore prices have declined by some $15/t, sources noted. Some steel traders have warned this year will be tougher than 2008 because China’s overcapacity problem has worsened. The nation’s crude steel capacity is now 900m tonnes/year but was only around 650m t/y in 2008. Moreover, a dramatic economic stimulus package to boost demand is unlikely this year, so traders sense that only when mills start cutting production might steel prices stabilise.
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