Singapore — Production cuts ordered for China's steelmaking hub, Tangshan city, over winter are less stringent than in previous years, therefore is unlikely to have a major impact on steel supply, market sources said Oct. 13.
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Register NowThe government of Tangshan, located in Hebei province, ordered most steel mills to reduce blast furnace output by 10 percentage points to 45% of capacity from the start of October to the end of March.
This compares with 50% output cuts at most local mills over October 2019 to March 2020.
Market sources expect the output cuts to be poorly implemented as seen during last year's winter.
Based on the output cut measures for the upcoming winter season, 0.65 million-0.67 million mt/month of pig iron making capacity will be idled in Tangshan city between October and March. Last winter, about 4.6 million-4.7 million mt/month of pig iron making capacity was supposed to have been idled, S&P Global Platts estimated.
However, last winter's output cut orders were not strictly implemented, and the drop off in pig iron and crude steel production in the fourth quarter of 2019 was mainly due to a fall in seasonal demand.
China's average monthly pig iron and crude steel output in Q4 2019 dropped by about 4.5% and 3.6% from Q3 2019. The output declines in Q4 from Q3 in 2020 are expected to be even less than these two figures.
Platts expects China's crude steel production to grow by 4%-5% on the year to 1.035 billion-1.045 billion mt this year.
Some market sources said the final figure may be even higher than 1.045 billion mt if demand in November and December is stronger than expected due to fiscal stimulus boosting infrastructure construction.
The China Iron & Steel Association estimated that the country's crude steel production averaged over 3.08 million mt/day during Sept. 20-30, up 1.49% from Sept. 10-20 and up 26% on the year.
CISA members accounted for 2.19 million mt/day over Sept. 20-30, 21.68% higher than a year ago.
Steel stocks of five major brands in 20 Chinese cities reached 12.23 million mt as of Sept. 30, down 1.5% compared with Sept. 20.
Rebar and HRC inventories reached 6.36 million mt and 1.89 million mt, respectively, by Sept. 30, down 2.2% and up 0.5% compared with mid-September, according to the CISA data.