China's steel production continues to fall

Steel production in China fell 1.7 percent to 69.95 million tons in May from a year earlier, and output in January-May was 340.17 million tons, down 1.6 percent from the same period last year. At the same time, exports from the country continue to grow. Government data showed that this is due to the stagnation in the economy and the real estate market.

Steel is one of the most demanded metals in the world. Its ruggedness and durability make it ideal for use in nearly all major industries, including automotive, energy, consumer goods, and home construction.

Smelters had boosted production a month earlier in anticipation of a pickup in seasonal demand, but rising iron ore prices, weak steel demand and market glut prompted the mills to cut production. The average daily crude steel output in May was 2.256 million tonnes, up from 2.297 million tonnes in April.

“Steel mills have curbed production since mid-May as a result of lower profits. And that trend will continue in June as demand for steel shrinks and iron ore remains in an uptrend,” said an analyst at Everbright Futures in Shanghai.

The demand for steel products from the largest producer and consumer of building materials in the world is hit by a chronic decline in an economy that is losing momentum. Steel consumption in the country continued to decline in the first quarter of this year, after falling in 2014 for the first time in more than three decades. This prompted Chinese producers to increase steel exports, which boosted shipments to 9.2 million tonnes in May, a four-month high.

At the same time, iron ore prices jumped nearly 40 percent from a 10-year low below $ 50 a tonne in April amid declining stocks of raw materials in Chinese ports, while Shanghai Steel Rebar Futures (SRBcv1) rose only 4 percent from their minimum in April.