In the first week of July, Chinese steel prices declined like a roller coaster ride, which in return has caused a new round of production cut. Not only more steel mills are involved, but also more large steel mills begin the reduction plan.
More Chinese steel mills are cutting production
Under the influence of all bad news, last week steel price continued the downward trend to the bottom. At the same time, production capacity of steel mills also declined.
Comparatively, more mills begin maintain and reduction arrangements in July 22nd steel processing enterprises are in maintenance reduction, with a decline of production capacity of more than 1.4 million tonne, five enterprises suspend production for equipment overhaul, four enterprises are having blast furnace overhaul, which is expected to cause a production decline of about 63,000 tonne of crude steel. Besides, maintenance reduction has spread from small mills to large steel enterprises such as WISCO, Shagang Group and Pangang Group.
The oversupply and reduction of output in Chinese steel market are mainly caused by two factors. First, the excessive expansion of capacity has far exceeded the demand growth of downstream industries. Second, the price rise of iron ore has increased costs, and the increase has gone beyond the digestion ability of downstream industries. Other factors include the government’s policy energy conservation and emission reduction in the third quarter and the demand decline of steel products caused by the hot summer weather.
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