China's steel production declines in October for sixth consecutive month

The China Iron and Steel Industry Association reported on November 9 that daily crude steel production in China declined for the sixth straight month in October, falling 4.9% from the previous month and hitting a 44-month low.

Industry sources expected China's steel production to continue to fall in November as some steel mills were already operating at a loss.

However, steel prices in China continued to decline in November, indicating that steel demand fell faster than the rate of decline in production, the sources added.

According to CISA estimates, daily crude steel production in China in October fell by 21.4% year-on-year to 2.338 million tonnes /day, the lowest level since March 2018.

Despite the rapid decline in steel production, cumulative stocks of finished steel in steel mills and spot markets monitored by CISA fell just 0.3% from the end of September to 22.53 million tonnes.

Some market sources report that steel inventories declined much more slowly than steel production, because the decline in demand from end users, especially in the construction sector, outpaced the decline in steel supply.

According to real estate data provider China Index Academy, funding for Chinese developers fell 60% month-on-month in October and 75% year-over-year. Some sources added that China's measures to tighten financing in the sector are expected to continue to undermine demand for construction steel in 2022.

Production is slowing down.
Insufficient demand for steel on the domestic market has led to the fact that since November, some enterprises began to operate at a loss.

In addition to the nationwide steel production cuts required by Beijing to keep China's crude steel production in 2021 at 2020 levels, some mills in Shanxi recently began to cut pig iron production by more than 20,000 tonnes per day to minimize losses, some traders say. ... said.

In September, Shanxi produced 4.747 million tons of pig iron, or 158,000 tons per day.

Meanwhile, while Tangshan City in Hebei Province recently loosened its steel cutback measures due to improved air quality, local steelmakers have been reluctant to ramp up production due to low margins or unprofitable operations, the sources said.

Several sources in northern China said weaker steel production could provide some support for steel prices in late November. But any rebound in steel prices is likely to be limited as demand for construction steel in northern China has already entered the off-peak season due to cold winter weather, they said.

Moreover, several sources have been closely following the trend in steel prices as falling iron ore and coke prices may leave more room for further declines.