Since the air quality ranking of Tangshan city continues to decline, the municipal government of Tangshan, an important steel production base in northern China, requires the 11 local A-class steel mills to take the initiative to cut steel production by 30 percent, while B-class or lower class steel mills need to suspend 50 percent of their sintering equipment during the July 1-31 period. Meanwhile, four blast furnaces will implement maintenance works during July, affecting a capacity of around 21,000 mt per day, and more blast furnaces are expected to carry out maintenance works in the future.
Steel production in China was at relatively high levels in June, taking into account good expectations and despite the worsening of weather conditions and the slowdown of demand. The China Iron and Steel Association (CISA) said that in mid-June (June 11-20) the average aggregate daily crude steel output of large and medium-sized steel enterprises in China totaled 2.2627 million mt, up 1.42 percent compared to early June (June 1-10), when it had risen by 6.48 percent compared to late May.
The new mandatory measures for production cuts in Tangshan are expected to lower iron ore consumption and prices for iron ore are expected to fluctuate at lower levels in the coming period. Today, on July 3, iron ore with 62 percent Fe content declined by $0.85/mt today from Friday to $110.65/mt CFR.
At the same time, despite the expected slowdown in steel demand in July, steel prices in the local market in China may continue to receive support in the coming few weeks, with small fluctuations possible. On July 3, rebar futures in Shanghai Futures Exchange closed at RMB 3,767/mt ($522/mt), increasing by 0.56 percent compared to the previous trading day. At the same time, rebar spot prices inched down on the same day by RMB 7/mt ($1/mt) from Friday to RMB 3,783.3/mt ex-warehouse according to SteelOrbis’ data, signaling that slow demand will not allow prices to increase much even as production is expected to go down.
