Steelmakers in China continued to increase their output despite a sluggish domestic market in the first half of 2012, which resulted in diving market prices, rocketing stocks, and worsening profits.

China’s crude steel production rose 1 8% on year to 357.2Mt in the first half of 2012, but the growth rate slowed, 7.8% lower than the year earlier, according to the NDRC.

Output of steel products grew 6.1% y-o-y to 467.44Mt in the January-June period, but the growth rate was again slowed being 6.7% lower

Imports of iron ore rose 9.7% y-o-y to 366 2Mt in the first half 2012. Exports of steel products gained 12.1% to 27.25Mt, while imports fell 13.4% to 6 96Mt.

The composite price index of China’s domestic steel product market averaged at 115.87 in June, down 2.89 points from the previous month and also down 19.33 points from a year earlier, according to the NDRC.

In June, the average price of 6.5mm high speed wire rod was RMB 4145/t, (US$650.6/t) which was 2.2% lower than in May and some 16% lower compared with the same period 2011. Spot trading has been sluggish as buyers generally adopt a wait-and-see attitude, expecting the price to decline still further. Domestic steel prices have been on a downward path since April this year, currently falling to as low as RMB 3900/t ($612.1/t).

A number of rolling mills halted the purchase of billet leaving the billet market without buyers and comparatively high market prices. In turn, the weakening steel billet market is expected to trigger a correction in ore prices downwards.

Source: China Metals e-mail