China’s June monthly and first half steel figures were nothing to boast about in yesterday’s production data, released with the GDP outcome. Nor did the coal production and imports data suggest the sector is going to improve.
Crude steel output dropped 0.8% in June from a year earlier to 69.37 million tonnes, with demand hit by sluggish economic growth, especially the weakening in property investment.
Total crude steel output dropped 1.3% to 409.97 million tonnes for the first half of 2015 compared with the same period a year ago, according to the data from the statistics bureau.
But average daily output reached 2.298 million tonnes last month, the highest since June last year, according to data from the National Bureau of Statistics.
Analysts say that apparent contradiction is due to steel mills running plan at a smaller loss to try and keep a lid on larger losses that would accrue if they were to cut output.
Chinese steel prices have plunged to the lowest levels in more than 20 years as the slowing economy cuts into demand for a range of commodities including iron ore, coal and steel, threatening the survival of small steel mills across China, many of whom are controlled by local or provincial governments who are being allowed to refinance debts to keep these near bankrupt businesses in operation.
China’s apparent steel consumption fell 5.1% in the five months to May from a year earlier, more than the 3.3% fall in the first five months of 2014.
The only thing keeping steel alive and able to avoid crippling falls in production and huge losses, is the strong level of exports – currently running at an annual rate of well over 100 million tonnes.
Exports jumped 28% in the six months to June to 52.4 million tonnes, according to data this week from the Customs Department.
Those exports are supporting the otherwise weak crude steel production figures for June and the first half of the year. That in turn make it easier to understand the weak demand for iron ore and the falls in spot prices for the commodity.
Chinese imports of iron ore fell 0.9% in the six months to June (from the same period of 2014) totalling 452.9 million tonnes.In June, iron ore imports tolled 74.96 million tonnes with 70.87 million tons in May, around 6.5% higher than June 2014.
The combination of weak demand from the steel sector, and the crack down on pollution and slow growth in demand for electricity saw a 4.9% drop in June coal output, to 327 million tonnes, according to yesterday’s data.
Production in the six months to June fell 5.8% to 1.789 billion tonnes, compared with the same period of 2014, the National Bureau of Statistics said. Coking coal production in June also fell 6.9% on the year to 38.38 million tonnes.
China’s coal imports plunged 33% in June, from a year earlier to 16.6 million tonnes.
But that was up 16.5% from may as Chinese power companies imported more coal to rebuild stocks ahead of the peak summer demand period from July into September. However, first-half imports were still down 37.5% at 99.9 million tonnes, according Chinese Customs.
