Chinese Steel Output Falls
China’s steel output decreased by 2.5 percent in October, a positive, but preliminary, indication that excess capacity cutbacks by the Chinese may be starting to take effect.
The global steel industry has been suffering from rock-bottom prices in recent years and has blamed Chinese excess capacity and production at least in part. The Chinese have undertaken to reduce capacity and production under international pressure.
Steel prices had been on the rise for much of this year, and the Chinese cutback should have created the expectation that they would rise further. But that wasn’t the case according to a recent report from the research organization MetalMiner.
Domestic steel prices increased during the last week of October and the first week of November, they fell in mid-November. All forms of steel in China except cold rolled coil saw price declines.
“Chinese steel prices and production serve as the primary drivers of the world steel industry,” noted the report.
Some regions in China, such as Hebei province, plan to continue steel capacity cuts until 2020. That will reduce production further by 20 million tons.
What about prices? “Buying organizations will want to pay close attention to Chinese price trends and domestic lead times,” said the report. “Even if the decrease in Chinese prices appears less steep than the US decline, we want to see more price movements to the upside before drawing any conclusions.”