The China Iron and Steel Association (CISIA) has issued a proposal titled "Recognizing the situation and maintaining determination to jointly maintain the stable and orderly development of the iron and steel industry", urging Chinese steelmakers to reduce production intensity by following the aim of meeting users’ needs and the principle of balancing supply and demand. The CISA commented that the continuous contraction in the real estate industry and the slowdown in infrastructure construction have led to the sluggish demand for steel.
The CISA said Chinese steelmakers should reduce inventory levels of steel and realize the dynamic matching of supply and demand. Though no specific figures have been issued, market sources believe that the CISA’s call will be in line with the restrictions announced by local governments lately. On March 7-15, local Chinese steel associations (in the provinces of Yunnan, Guandong and Shandong) asked steel mills to cut utilization rates by 20-50 percent depending on the mill. But this has failed to lead to significant production declines – CISA members’ daily crude steel output in mid-March (March 11-20) eased only by 0.51 percent, staying above 2 million mt. Inventories of mills continued to remain high at almost 20 million mt in mid-March.
Market sources believe that the CISA’s announcement targets a reduction by up to 40 percent around the country, which will prevent mills, which had halted for maintenance works in mid-March, from resuming production.