STEEL NEWS

Reducing steel production in China may continue in the second half of the year

As reported by Platts, a recent call from China's Politburo for a "campaign-style carbon cut" adjustment is expected to target mainly the Chinese coal power industry, while a nationwide cut in steel production is likely to be implemented in the second half of 2021. years as a deterrent. According to market sources, the main reason for this was the price of ore.

China's top planning authority at a meeting on July 30 said it was important to first establish a path to peak carbon emissions before breaking old models.

This announcement led to a drop in the Chinese steel futures market. On August 2, the most actively traded October contracts for rebar and hot rolled coil on the Shanghai Futures Exchange fell 5.6% and 5.7% over the day to RMB 5,414 / t ($ 838 / t) and RMB 5,780 / t, respectively.

However, market sources said the cut in steel production in China was not a "campaign-style carbon cut."

Market sources said that the request to cut steel production was initiated by the central government, the decision came in conjunction with the abolition of the scrap import tax in April and the lifting of discounts on steel exports in April and July.

All policy changes were well planned to contain iron ore prices by reducing steel production and increasing scrap imports, the source said.

The contraction in steel production, which began in July, played an important role in lowering iron ore prices and increasing the profitability of steel.

Containing iron ore prices remains a priority, indicating that steel production cuts are expected to continue in the second half of 2021 and even into 2022, some sources said. However, the annual production cut rate for 2021 could be adjusted to meet the demand for steel, the sources added.

The Chinese government has mandated steel mills to ensure that annual steel production in 2021 remains at the 2020 level.

This means that in July-December, crude steel production in China should decrease by 59 million tons, or 11% compared to the same period last year, to 502 million tons, according to calculations by S&P Global Platts, based on data