Chinese steel mills set to roar after curbs end – CISA

Source: XINHUA

Xinhua reported that Chinese steel producers are eager to unleash their mills’ capacity when this winter’s output curbs end next month. They are hoping for a repeat of last year’s record profits based on high margins and less competition after outdated plants were closed. China shut down up to half of its steel production this winter in 28 cities in the country’s manufacturing heartland in the north as part of an anti-pollution campaign. With margins still encouraging full output, China’s pent-up steel production should erupt when the curbs expire on March 15.

Because of the curbs, China’s average daily steel output in December was the lowest in a year at 2.16 million tons, government data showed last month. Average daily output could rise to about 2.5 million tons if the mills quickly boost production when restrictions are lifted, Wang Yingsheng, vice secretary-general of the China Iron and Steel Association said recently.

With the government likely to re-impose the limits next winter, northern Chinese mills will have only about eight months to run at full speed, so plants are stocking up on raw materials to maximize production while the market conditions remain strong.

Profit margins have retreated from last year’s peaks, but are still more than enough to motivate maximum production, said the southern mill manager.

Chinese steel margins for rebar this year are averaging 866 yuan a ton, according to data from brokerage CLSA. While down from last year’s average of 922 yuan, rebar margins are well above the five-year average of 251 yuan. Hot-rolled coil margins are averaging 865 yuan this year versus a five-year average of 259 yuan.

Source: XINHUA