Crude steel output that China achieved in May 2022 increased by more than 4.1% compared to the previous month as the social distancing measures to prevent the outbreak of the Covid-19 epidemic gradually eased and factories started. recover and work again.
According to data from the National Bureau of Statistics (NBS), in May 2022, China produced 96.61 million tons of metal compared with 92.78 million tons in April 2022.
Average daily output in May 2022 was 3.12 million tonnes, up from 3.09 million tonnes in April 2022, reaching the highest level since June 2021.
Steel output increased due to limited raw material supply, while transportation was eased, factories went into operation, hoping for a quick recovery in demand.
China’s strict “zero-COVID” policy has crippled factory operations, and steel mill profits are being squeezed by weak demand and high raw material prices.
In May 2022, China’s factory inflation cooled to a 14-month low, as demand for steel, aluminum and other key industrial commodities softened as social distancing was introduced. for many months.
In addition, Beijing has introduced measures to revive the economy, which has been severely affected by the pandemic.
Manufacturing firms are keeping blast furnaces up and running by using lower grade ore to reduce output in hopes of meeting demand, said Atilla Widnell, managing director of Navigate Commodities in Singapore. recovery steel. However, China has pledged to cut steel production in 2022 to protect the environment, and has pledged to reduce annual output.
Experts believe that rising Chinese steel production will continue to weigh on prices in June and exacerbate oversupply as domestic steel demand remains tepid as the economy is still not fully open. after the pandemic.
As of May 20, finished steel inventories at steel mills and the spot market monitored by CISA increased to 32.06 million tons, 20.1% higher than the same period in 2021.
The sources said, the increase in steel inventories reflects the slow recovery of steel demand in both construction and manufacturing sectors due to the virus outbreak.
It added that whether the demand recovery will pick up pace in June remains a big question as travel restrictions continue in the most developed parts of China, such as China. such as Beijing, Tianjin and Shanghai.
Chinese steel prices have been under pressure for some time due to oversupply.
China’s domestic rebar price fell 8%, or 412 yuan/mt ($61/mt), from early May to 4,820 yuan/mt on May 25, according to S&P Global Commodity data. Insights.
Market sources said some electric arc furnace steelmakers started to reduce output between mid and late May as they faced losses, but most integrated steelmakers use The combined blast furnace still maintains stable production.
“The losses at the integrated steel mills are generally still too small to lead to production cuts, and some are still marginally profitable,” one source said.
Meanwhile, steel demand may not recover strongly in June as COVID-19 disruptions persist, the source said.
“Ultimately, I think factories will have to cut production to prevent further losses.”
China’s iron ore futures hit a one-week low on May 26 as demand remained subdued downstream, while investors worried about signals that the world’s second-largest economy The world is shrinking in the second quarter due to the impact of the COVID-19 wave.
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