Mar 13, 2014 09:20 GMT Source:SMM
Tags: China crude steel production

SHANGHAI, Mar. 13 (SMM) – China’s daily crude steel output hit a new high of 2.22 million tonnes in the first two months, up 10.2% from last December, according to the National Bureau of Statistics. However, the daily production might edge lower in March, Shanghai Metals Market’s ferrous branch Steelease believes.

China’s crude steel output rose 4.3% year-on-year to 130.80 million tonnes in January and February, according NBS data.

Optimism on post-holiday steel market was mainly behind the higher crude steel output. However, downstream demand proved weaker than expected after the holiday, which would cause March’s production to fall, Steelease’ Yuan Qianqian said.

Downstream demand after the holiday recovered more slowly than expected, putting greater inventory pressure on steel mills, while falling steel prices further squeezing mills’ margins, discouraging them from maintaining production. Thus, mills expected to lower prices and curtail production to deplete existing stocks.

In addition, most steel mills reported tight cash, and banks also tightened control over lending to steel mills. A steel mill contacted by Steelease was forced to shut down blast furnaces, said Yuan. The mill was under great financial pressure and had failed to repay loans.

Enhanced efforts to tackle excess capacity and higher environmental protection requirements would also affect production at mills, especially those without qualified environmental protection facilities. This would be particularly evident during the NPC and CPPCC sessions in early March.