- 0086(21)62671680
- 62671061
- sales@hyssgroup.com
- Language
According to Mysteel.com, associations in the Chinese steel industry announced their proposals to reduce steel production in China in 2021 in response to a call from the Chinese Ministry of Industry and Information Technology (MIIT) and the China Chamber of Commerce of Metallurgical Enterprises (CCCME).
According to a January 27 announcement, the CCCME invited China to consider cutting steel exports while increasing steel imports, reducing iron ore imports while purchasing more steel scrap from overseas, and adjusting coke benchmarks.
MIIT's call to cut steel production is fraught with challenges as domestic steel demand could continue to climb, according to CCCME, to about 1.1 billion tonnes of crude this year in the context of higher GDP growth.
But the cut will still be possible if China cuts steel exports by 30 million tonnes, or 50% on an annualized basis, to supplement domestic supply, and the relevant authorities may even take some action to make sure of this, and at the same time In the meantime, China should increase its imports of semi-finished steel products and finished steel by 5 million tons each, as well as increase imports of steel scrap by 10 million tons.
CCCME is fully aware of the risks of potential volatility in steel prices due to changes in the supply and demand balance, and thus reminded the steel industry of “a gradual, correct and measured rate of output reduction”.
The China Iron and Steel Industry Association (CISA) agreed that a decline in production is still achievable, albeit a modest increase in demand, believing that “the market will automatically adjust to itself through steel imports and (consumption) of steel stocks” at the annual meeting with members on January 27.
According to the association, steel inventories in China have fallen to a reasonable level since April last year, but the volume is still higher than last year.
In addition to the proposed measures, an analyst from a trading house in Shanghai also raised the issue of the possibility for Beijing to reduce its steel production in the country by tightening its carbon controls, which will be in line with Beijing's carbon commitments by 2030 and in any case with zero. carbon emissions by 2060.
While many market sources are not as confident as associations. As one noted: “It is highly unlikely as long as demand for steel grows and production continues to grow, the only difference will be in how much. And this is on condition that the Chinese authorities do not interfere with administrative measures. "
“If the market goes its own way and Beijing's investment in infrastructure continues to drive demand for steel, automotive, mechanical engineering and household appliances, things will look pretty good. The real estate market is the only undefined sector, but it alone will not be able to reduce steel production. "
The Shanghai-based analyst also noted that the real agenda for reducing steel production may have more to do with iron ore than steel after Beijing witnessed the vulnerability and vulnerability of Chinese steel mills, which rely heavily on imported iron ore.
“Last year, steel margins were largely eaten away by the surge in raw material prices (despite stronger demand),” he said.
A trader from Central China agreed, noting that along with lower steel production, CISA also mentioned a decrease in iron ore imports and an increase in scrap purchases from abroad.
