The impact of China's policy to reduce steel production

The National Development and Reform Commission said it will continue to reduce crude steel production across the country so that crude steel production does not increase from last year.

According to statistics from the National Bureau of Statistics, Anhui and Hubei provinces recorded the largest year-on-year increase in crude steel production from January to March, with an increase of 469,000 tons and 451,500 tons respectively, while Hebei province recorded a year- an annual decline of 15.37 million tons. Due to severe production restrictions in Hebei from January to March, the province will not face an overproduction of crude steel in the future, and there may be more room to increase production. Other provinces are forced to control steel production.

In March, crude steel production in China amounted to 88.3 million tons, down 6.1% compared to the same period last year. With total crude steel production at 1.03 billion tonnes in 2021 and 243 million tonnes in the first quarter of 2022, the production ceiling should be capped at 789 million tonnes for the remainder of this year to ensure that production in this year will not exceed the volume of production this year. last year. Thus, the average monthly and average daily production should not exceed 87.71 million tons and 2.87 million tons, respectively.

Steel mills won't have much room to increase production going forward compared to March or they will face stronger pressure from the government to cut production in the second half of the year.

Since the introduction of the reduction policy for crude steel production in 2021, the production of domestic steel mills and raw material prices have been hit hard.
Since the goal of reducing the production of crude steel is an annual plan, the production plans of domestic steel companies are unlikely to change much in the short term. Overall, domestic steel companies will be relatively less affected by the production cut policy in the first half of the year, and domestic crude steel production will continue to rise from March as many steel companies plan to restart blast furnaces.

Source: SMM