A few Chinese blast furnace mills are preparing to stop finished steel production lines next month on lackluster demand in domestic and seaborne markets, an S&P Global Commodity Insights survey of 18 major mills across different regions in the country showed July 28.
A tight rebar supply-demand balance has been reached on account of lower production and weak demand.
“Most of the production cuts were temporary and by mill maintenance,” said one of the Eastern China mill sources, adding that when blast furnaces mills’ margin recovered, the speed of the production volume increase will be fast and strong.
“HRC demand in China was weaker than rebar. Some mills might switch their molten iron from producing HRC to rebar,” said a Shandong-based mill source.
Platts assessed Beijing’s domestic rebar spot price at Yuan 4,010/mt ($592/mt) ex-stock actual weight July 27, down Yuan 206/mt, compared with the last S&P Global survey published July 6.
Eight mills part of the July 28 survey had cut production by either idling blast furnaces, lowering production volume, or stopping production lines, compared with 11 mills on July 6.
Among the eight mills, one in Northeast China continued to cut production by mill maintenance, as part of the yearly plan which has been set in early this year. An Eastern China mill is maintaining one blast furnace as part of its yearly plan. A mill in Jiangsu, East China, said they have continued to decrease output on rebar, wire rod and HRC due to weak profits since the survey which was done on May 27, as part of the mill’s yearly plan. The mill source said the mill might not increase production unless the margin turned positive.
Besides the above three mills, the other five mills in eastern, northern and northeastern, all belong to unplanned production cuts.
A Northern China mill is cutting production due to negative margins. One in Northeast China said that the mill has stopped three small blast furnaces and four HRC production lines. An Eastern China mill is maintaining all the finished steel production lines till Aug. 6. The other two mills cut production by unplanned mill maintenance.
“Most mills would not choose to take the initiative to cut crude steel production,” said an eastern China mill source. Chinese mills have concerns, as lowering output now might reduce their 2023 production amid the government’s climate controls.
Two mills in the survey told S&P Global that they plan to stop several finished steel production lines or switch to producing different products in August. One expected that it will affect a total of 140,000 mt of finished steel output in August, including flat steel and wire rod.
Chinese domestic rebar margin fell to a negative $21.39/mt July 27 compared with a negative $40.57/mt July 5 and has been in the negative territory since June 13, according to an analysis of mill margins by S&P Global.
Separately, some electric arc furnace mills mills might restart due to higher production margin in EAF, while most are yet to run the furnaces as the scrap is hard to collect.
original source: https://www.win-road.com/news/chinese-steel-mills-to-suspend-few-production-lines-in-aug-sp-global-survey%ef%bc%81/
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