China's steel industry is facing significant operational pressures, prompting Jiang Wei, Vice Chairman and Secretary General of the China Iron and Steel Association (CISA), to call for voluntary production cuts. This appeal aims to reduce steel inventories and secure reasonable annual returns for steelmakers. The industry experienced a tough first half of the year due to persistent oversupply and declining steel exports.
During the first half of the year, crude steel output in China fell by 3% year-over-year to 500 million tonnes, while apparent consumption dropped by 3.6% year-over-year to 440 million tonnes. Finished steel exports also declined by 5.6% year-over-year, totaling 54.87 million tonnes from January to June. These figures highlight the challenges faced by the sector, particularly the issue of oversupply.
The oversupply has led to a significant increase in inventories. CISA member mill stocks rose by 7.2% year-over-year, and trader stocks climbed by 7.9% year-over-year. CISA emphasizes that the traditional peak consumption months of September and October offer an opportunity for the industry to practice "strict self-discipline" in production control to address these elevated inventory levels and secure earnings. The association stressed that unified resolve on output restraint is crucial for maintaining market stability and profitability.
Recently, Mysteel reported that hot-rolled coil (HRC) production among 37 surveyed Chinese steelmakers dipped by 45,300 tonnes, or 1.5% week-on-week, to 2.91 million tonnes during September 3-9. The average capacity utilization rate for strip mills among these surveyed steelmakers decreased by 1.16 percentage points to 74.23%, with mills reportedly suffering heavy losses due to rising coking coal costs.
