There have been rumors about Tangshan’s aim to limit the production of sintering machines by not less than 30 percent of full capacity during July 4-15, though further observation is needed to see how the production cuts would be implemented.
In addition, against the background of ensuring safety and gas balance, converters and blast furnaces will also implement certain production reduction measures.
Pig iron output and crude steel production will be corrected by similar rates, according to the market, and this means that mills will have to have production utilization rates at not above 70 percent, while the average utilization rate in Tangshan stood at 83-85 percent in late June.
Market analysts forecast the production limit in the given period may be an important preparation for the commemoration of the 80th Anniversary of the Victory of the Chinese People's War of Resistance against Japanese Aggression and the World Anti-Fascist War, when China will hold a military parade.
Impact of production restrictions on prices and market reactions
The production reduction is expected to reduce the supply of finished steel to the spot market and bolster finished steel prices. Today, July 2, local average rebar and HRC prices in China have gained RMB 30/mt ($4/mt) and RMB , coming to RMB 3,153/mt ($441/mt) and RMB ex-warehouse, respectively, according to SteelOrbis’ information. Rebar and HRC futures at Shanghai Futures Exchange have added 2.61 percent and 2.21 percent, respectively.
Another reason for the better mood in the Chinese steel market today has been the announcement by the country’s top leadership that “disorderly low-price competition” needs to be regulated, though no concrete measures have been voiced so far.
Regarding the previous warning by the China Iron and Steel Association (CISA) that Chinese companies should control semis exports, which rose too sharply this year, there have been also no official regulations announced so far. “Stricter checks may slow China’s billet exports. Companies might need more time for documentation and quality checks, and some may cut exports due to difficulty in meeting requirements,” a Chinese mill told SteelOrbis, though adding that overall semis export volumes will remain at high levels, with no hope for a local demand rebound in the short term.
$1 = RMB 7.1546