China's steel supply drops 2.2pc in first ten months than same period in 2014
Source:Xin Steel Industry   Date:2015/11/13

The world's biggest steelmaker is pouring less metal. Production in China dropped in October from a year earlier as mills battled lower domestic demand, slumping prices and rising industry losses.

Crude steel output was 66.12 million metric tons, 3.1 per cent lower than the same month last year, according to National Bureau of Statistics data on Wednesday. Supply for the first 10 months was 675.1 million tons, 2.2 per cent less than the same period in 2014.

Mills in China, which account for about half of global output, are confronting the first shrinkage in local demand in a generation, exacerbating industrywide overcapacity and hurting the outlook for iron ore cargoes shipped from the biggest miners in Australia and Brazil. Rio Tinto Group, BHP Billiton and Vale are raising low-cost output even as China makes less steel, seeking to seize greater market share. Overall industrial output in China last month held at the weakest level since the global credit crisis.

"There's a mismatch between rising iron ore supply and falling steel output," Wang Mohan, an analyst at Maike Futures, said by phone from Shanghai. "It's an established trend that Chinese crude steel production is contracting."

Steel production in China may eventually shrink 20 per cent, Shanghai Baosteel Group Corp. Chairman Xu Lejiang forecast last month. Jiangsu Shagang Group Chairman Shen Wenrong said that there's a good chance steel production in the country will drop by at least 10 per cent within the next decade, according to a report in The Australian newspaper on Wednesday.

Iron ore with 62 per cent content delivered to Qingdao was at $US48.58 a dry ton on Wednesday, 32 per cent lower this year, according to Metal Bulletin Ltd. The raw material bottomed at $US44.59 on July 8, a record in daily price data dating back to 2009.

China's steel output will probably shrink 1.4 per cent a year between 2016 and 2019, a reversal from growth averaging 6.6 per cent from 2011 to 2014, BMI Research said in a note received on Wednesday. Iron ore prices are expected to remain low due to an oversupplied seaborne market, it said.

Signs of difficulties for steelmakers are mounting as product prices tumble. Medium- and large sized mills tracked by the China Iron & Steel Association incurred losses of 28.1 billion yuan in the first nine months of this year, the association said on October 28. Steel demand in China shrank 8.7 per cent in September on-year, it added.

"The whole industry is bleeding money," Maike's Wang said. "Actual steel demand remains weak as economic growth is slowing."



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