Tangshan and Qinghuangdao, two of China’s big steelmaking cities both located in Hebei Province, are implementing production cuts subject to environmental protection requirements. For instance, Tangshan has required A-ranking steelmakers to stop one sintering machine each until the end of June, while others need to halt operations of one blast furnace each, though specific measures need further confirmation.
Meanwhile, steelmakers in Qinghuangdao have halted five sintering machines in total during June 3 to June 7.
It is worth mentioning that the current production cuts following the reduction in crude steel production in China in late May - CISA mills’ daily steel output dropped by 6.68 percent in the last ten days of May, due to the low margins of mills and oversupply. So, the production cuts in question were market-driven.
Due to the production halts, finished steel prices in China have indicated rises since last week. For instance, the average rebar spot price in China reached RMB 3,753/mt ex-warehouse on June 6, up by RMB 73/mt ($10/mt) since last Friday, while up RNB 116/mt ($16/mt) week on week. At the same time, according to SteelOrbis’ information, domestic HRC prices in China have risen by RMB 93/mt ($13.1/mt) over the past week to RMB 3,790-3,980/mt ($534-561/mt) ex-warehouse as of June 6. Though the recovery in the domestic steel market in China has been obvious, most market participants agree that it is due to the recent production cuts mostly and higher raw material prices, while demand has not improved and the demand outlook is not so positive either. Nevertheless, a number of traders shared the view that output restrictions may support prices in June and prevent the markets from recording further declines compared to the levels seen in May.
$1 = RMB 7.1075