China's July crude steel output eases on production curbs

BEIJING, Aug 15 (Reuters) - China's crude steel output in July eased 0.34% from a month ago, the statistics bureau said on Tuesday, because of production restrictions in Tangshan city in northern China and Sichuan province in the southwest.

The world's largest steel producer manufactured 90.8 million metric tons of the ferrous metal last month, down from 91.11 million tons in June but up 11.5% from the same month in 2022, when steel mills cut production amid shrinking margins as property sector woes stifled demand.

Average daily steel output in July came in at about 2.93 million tons, down 3.6% from 3.04 million tons in June but up from 2.63 million tons in July 2022, according to Reuters calculations based on NBS data.

The month-on-month decline in steel output was mainly because of production restrictions in Tangshan, with output there clearly contracting from July 20, said Cai Yongzheng, a Nanjing-based director of Jiangsu Fushi Data Research Institute.

Tangshan, China's top steelmaking hub, intensified its production controls in late July by requiring some mills to suspend operation of at least one blast furnace until the end of July, cutting about 488,200 tons of hot metal output from blast furnaces, consultancy Mysteel said in a report.

This came after Tangshan city had asked local mills to cut their sintering production by between 30% and 50% in July to improve local air quality.

Also, a number of steel mills in southwest China's Sichuan province scaled down production to ensure normal power supply during the holding of the FISU Summer World University Games over July 28-Aug. 8 in Chengdu, the capital of Sichuan.

Some electric-arc-furnace (EAF) steel mills also cut production in July due to losses from rising production costs as steel scrap prices hovered at high levels amid tight supply, and from higher electricity tariffs in some regions because of extreme temperatures last month, Jiangsu Fushi's Cai said.

The capacity utilization rate among the 49 EAF steelmakers surveyed dipped to 49% in late July, from 50% by the end of June, data from consultancy Fubao showed.

China produced 626.51 million tons of crude steel in the first seven months of the year, up 2.5% from the same period the year before, NBS data showed.

Market consensus is that Beijing will continue to cap steel output this year to limit carbon emissions, with some mills being told to make sure production didn't exceed 2022 levels.

It is still not clear, however, when mills will start to cut output and how stringent enforcement will be, given the state planner and regional governments have not announced details.

China's crude steel output in August is estimated at around 91 million tons, as some Tangshan mills that suspended operation in July resumed production from early August, Cai said.

Steel consumption in the second half of 2023 is expected to fall by 0.9% on the year, following a year-on-year drop of 0.6% in H1, with the full-year consumption down 0.8% on the year, according to an update on the WeChat account of the state-backed China Iron and Steel Association on Tuesday.

Reporting by Amy Lv and Andrew Hayley in Beijing; Editing by Kim Coghill and Tom Hogue

Our Standards: The Thomson Reuters Trust Principles.

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