China's steel production fell 1.7 percent in May

The latest data released by the National Bureau of Statistics show that Chinese steel production fell 1.7 percent during May this year, compared with the previous year. The drop in steel production was mainly due to weaker demand in the real estate sector and weaker economic growth.

China's crude steel production in May 2015 was 69.95 million tonnes. The country's total steel production in the first five months from January to May of this year was 340.170 million tonnes, down 1.6 percent compared to the corresponding five-month period in 2014. In addition, the average daily steel production fell from 2.297 million tons in April to 2.256 million tons in May this year.

According to industry experts, Chinese steel mills increased steel production in early May in anticipation of seasonal demand growth. However, the recovery in iron ore prices and weak demand, a widening gap between supply and demand, prompted the factories to cut their production by the end of the month. This state of affairs in production is likely to remain in the coming months due to rising iron ore prices and falling demand.

Domestic steel consumption fell sharply in the first quarter of this year. Prices for rebar, used mainly in construction, fell to a 12-year low. This forced producers to increase their steel exports. Exports of Chinese steel products totaled 9.2 million tons in May this year, reaching a four-month high.

Meanwhile, customs data show that iron ore imports to China declined in May from the previous month and the same month a year earlier. Imports totaled 70.87 million tons in May, down nearly 12 percent from April this year. Compared to May 2014, imports in May this year decreased by 8.4 percent. In May 2015, imports of iron ore were the lowest in three months.

However, experts believe that the worst for the Chinese steel industry is over. In China, supply will improve due to fewer new capacity and closures of polluting sites, and demand is expected to rise over the long term, driven by financial stimulus and monetary easing in the country.