Business

Steel output slips on weak demand

By Zhang Qi (China Daily)
Updated: 2010-08-12 15:46

A worker moves steel piping at a distribution center in Nantong, Jiangsu province. Xu Ruiping / For China Daily

BEIJING - Crude steel output in China fell to a five-month low in July due to weak demand, but might see a pickup over the next few months as steel prices rebound, analyst said on Wednesday.

Steel production hit 51.7 million tons in July, 3.9 percent lower than June, according to data from the National Bureau of Statistics on Wednesday.

The figure amounts to 1.67 million tons a day, down from 1.79 million tons a day in June.

"Chinese steelmakers have to cut production because of weak demand from the real estate and auto industries, but the market is already seeing price rebounds now," said Zhang Lin, an analyst from Lange Steel Research Center.

"The improving steel prices might stimulate Chinese steelmakers to up production by September."

China's largest steel producer Hebei Iron & Steel Group raised steel prices by 300 yuan ($44.27) for September on Wednesday. Analysts said other major steel mills like Baosteel will follow soon.

"Rising steel prices are also boosted by soaring raw material costs, " said Zhang. "Steelmakers are sounding out the market, and it's hard to predict how long the price hike will remain."

Prices of 63.5 percent Indian iron ore rose to $153 per ton on August 10, up 24 percent from July.

Ore prices dropped to about $122 per ton in July, after peaking at $185 per ton in April.

Domestic steel prices picked up 4 percent last week after a slump beginning in April, which indicates market adjustment due to weak downstream demand.

Average steel prices in China peaked the most in April since August 2009. But prices began to fall after the government released macroeconomic polices to control property prices, part of the nation's effort to slow GDP growth, which eased to 10.3 percent in the second quarter from 11.9 percent in the first.

Most of big steel producers, like Baosteel cut August prices by 300 yuan per ton from July.

About 40 percent of Chinese steel mills have to make cutbacks or put plants on maintenance, blaming increasing ores costs and declining steel prices, said Luo Bingsheng, vice-chairman of China Iron & Steel Association, on August 3.

He also said China's steel industry might face heavy losses in the second half of the year because of oversupply.

Benchmark Chinese steel prices have risen for three straight weeks as steel traders restock after depleting inventories.

Steel storage in 29 major Chinese cities dropped to 15.4 million tons on August 6, down 1 percent from a week ago, according to data from Lange Steel Research Center.

Iron ore imports to China rose 8.5 percent month-on-month to 51.2 million tons in July, Customs data showed on Tuesday. Analysts said iron ore imports rose for the first time in four months in July as steel mills are restocking after depleting inventories.

China Daily