China Raw Steel Output Cut could Accelerate in September

Chinese raw steel output decreased by 0.2% to 51.64 million tonnes in August from July, which decreased for 3 months in a row, announced by Chinese government on Saturday. Chinese major steel makers reduced the production while smaller makers apparently increased the production. The production kept more than 50 million tonnes for 8 months in a row and the daily production was same in August as July level. The production could decrease in September when Chinese government tries to accelerate the shutdown of old facilities and to limit power supply for better environmental action.

Chinese steel export decreased widely in August after the drop in July due to termination of export tax return for some items from July 15. Chinese steel makers try to increase the steel price through production adjustment while some makers increased the production to follow speculative purchase demand in August. The daily output was 1.666 million tonnes in August, which was 0.2% lower than July. The monthly output increased by 12.4% from a year earlier. The output from January-August increased by 15.3% to 425.77 million tonnes from same period of 2009.

However, Chinese makers could reduce the production in September when the government tries to reduce the output by eliminating old facilities and squeezing power supply with higher pressure than before. Chinese iron ore import in August was the lowest level since September 2009 while the demand would increase in demand season of autumn.

Asian sheet steel market price showed mixed sign recently. The hot rolled coil price increased by US$ 20-30 to US$ 660-700 per tonne from end of August while the price is still flat for cold rolled and coated steel products at just more than US$ 700 for cold rolled flat steel, US$ 720-750 for galvanizing steel and around US$ 850 for electrogalvanizing steel. Japanese integrated steel makers cannot push the price hike due to competition with rivals in China and South Korea while Japanese makers try to improve the profitability under high raw materials cost and high yen rate.

South East Asia Iron & Steel Institute (SEAISI) reported on Friday Asian steel market price would rebound in end of September due to higher demand compared with slow demand season of summer time and rainy season. Local steel makers try to increase the selling price by reducing the output. Some Malaysian makers reduce the output by 50% from the capacity during Ramadan. An Indonesian steel maker tries to increase the steel selling price to cover higher scrap and semi-finished steel cost.