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Chinese steel output rebounds in August; Demand limps

Update:2016-09-20   View(s):1111   Keywords :
The latest data released by the country’s National Bureau of Statistics indicates that Chinese crude steel output rebounded during the month of August this year. This is the sixth consecutive month that the crude steel production has registered increase month-on-month. However, the finished steel output dropped marginally during the month. Meantime, apparent steel consumption declined during the initial eight-month period of the year in comparison with 2015.

According to government data, the country’s crude steel production totaled 68.57 million metric tons in August this year, higher by 2.6% when matched with the previous month. The monthly crude steel output climbed higher by 3% when compared with the output during the same month a year before. The cumulative crude steel output during the initial eight months of the current year totaled 536.32 million tons, dropping marginally by 0.1% when matched with the production during Jan-Aug ’15.

The higher crude steel output suggests that the capacity elimination campaign had little effect on the country’s steel production. It must be noted that China has reported increased crude steel output in the midst of efforts across the globe, to curb excess steel capacity. The recently concluded G-20 summit had even announced the formation of a Global Forum would result in increased sharing of information as well as more cooperation among the major steel producing countries of the world. Also, the leaders from the US and European countries had blamed China for the global glut and had alleged that the country is responsible for flooding international markets with cheap steel products. Meantime, analysts warn that boost in profitability on account of higher steel prices has encouraged mills to increase steel production, although domestic demand has failed to pick up.

The NBS statistics suggest marginal drop in finished steel output by the country during August this year. The output totaled 97.91 million tons during the month, 0.9% lower year-on-year. This is the first decline year-on-year during the past three months. When matched with July 2016 levels, the production was up by 4%. The finished steel production during Jan-Aug ’16 inched higher by 2.2% to 755 million tons.

The Chinese apparent steel consumption during August this year was slightly up by nearly 5% over the previous year. However, the year-to-date apparent steel consumption declined by 2.45% when matched with Jan-Aug ’15. The real steel demand slipped further in August. The year-to-date real demand totaled 54.9 million tons, down by 7.66% year-on-year. The country’s property market which had rebounded on the back of government stimulus measures has started showing signs of slowdown. The real estate activity has started to moderate after a big surge during the first half of the year. Consequently, domestic steel demand has witnessed sharp decline in the country.

As per estimates, Chinese steel production is likely to peak at approximately 935Mt to 985Mt during mid-2020s, registering 1% CAGR growth per year. However, demand growth is predicted to remain volatile during this period.