So what is happening in China’s steel industry – iron ore prices have fallen by around 25% this year (iron ore is steel’s most important raw material) and yet production has now notched up two record months.
Iron ore prices are around $US60 to $US61 a tonne (according to one measure they traded at $US59.50 last Friday) – down from the 2017 high of just over $US94 a tonne in February.
Exports from Australia are running at near record pace so far this year, despite iron ore stocks are said to be high in Chna at ports and at steel mills. And yet this supposed a big negative is not reflective of what is happening to demand and supply – both remain buoyant.
The steel mills continue to turnout as much product as they can make rather than curtailing output because of weakening demand (which is usually produces a build up in iron ore stockpiles).
Analysts though point out that the mills are reacting to strong prices for steel products, while actual demand is weaker than it seems as investment weakens.
Data out yesterday showed China produced a record volume of steel in April, breaking the previous highest peak set in March.
Chinese steelmakers churned out a highest-ever 72.78 million tonnes in April, up 4.9% from March’s 72 million tonnes, the National Statistics Bureau (NBS) said.
In a briefing after the data release, an NBS spokesman said China had already met 63.4% of this year’s targeted cuts for steel and 46% of coal cuts.
The government aims to cut 50 million tonnes of low-grade outdated steel capacity this year, on top of the 65 million shut last year. The government is targeting rebar, used in construction, in particular.
But many of the plants that have been closed in recent years were already idled and output from still-open plants has continued to rise, as we have seen this year, especially in March and April.
China’s iron ore imports slid 2% on the year in April. The country imported 82.23 million tonnes of the steelmaking raw material last month, compared with 83.92 million tonnes a year earlier. That was down more than 13 million tonnes from March’s 95.56 million tons, hit a second highest record.
