China’s crude steel production rose 2.1% year-on-year to 419.46Mt in the January-July period, but the growth rate was 8.2% lower than it was a year earlier. In July alone, China’s crude steel output rose 4.2% from a year earlier to 61.693Mt.

The country’s crude steel production continued to grow despite an industry-wide financial loss since the beginning of this year. Steel prices haven now fallen to a level approaching production costs. Output, however, remains at a high level as the falling price of steelmaking raw materials has encouraged an increase in production.

Although steel prices rebounded a little in the week of August 14-20, the volume of trading remained low. In the face of declining steel prices, steel mills only purchased sufficient raw materials to maintain production. Many ore consumers strongly expected the ore price to continue to fall. The iron ore price will continue a downward trend and was likely to approach US$110/t, a Xinhua analysts said.

However, the decline in the iron ore price was still less than that of steel prices.

Meanwhile, domestic banks have strictly controlled loans to steel mills and this has led to mounting funding pressure on them. Given the high production capacity, steel prices still face downward pressure in the short term.

Source: China Metals e-mail