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About 18 Chinese mills announced maintenance work in April due to reduced profits or losses, while 21 blast furnaces scheduled maintenance this month, which will cut hot metal output. 78,000 tons/day.
Some mills in eastern China have closed rebar production lines from May 4-18 for maintenance, cutting total steel output by about 90,000 tons. A blast furnace manufacturer in Shandong will close its production line from May 24 for 12 days, reducing output by more than 150,000 tons.
A steel mill in central China plans to carry out production line maintenance for 12 days from May 9, cutting output of hot rolled coil by 80,000 tons. A northern Chinese producer is likely to reduce production of section steel by 100,000 tons in May.
Most electric arc furnace (EAF) plants in Sichuan and Guangzhou are operating at a loss and are likely to cut output in the coming weeks.
Finished steel output of five steel products - including rebar, coil, HRC, cold rolled coil and plate - fell 1.6% to 9.41 million tonnes in the week to May 4 from the previous week.
The Fengnan district government last week asked Tangshan to keep steel output unchanged from 2022, which further raised market expectations of a production cut, as the company's output increased 29% compared to the year. the same period to 35.13 million tons in the period from January to March this year.
Profits of steel mills fell to 50 yuan/ton ($7.23/ton) in early May from 100-120 yuan/ton in mid-March. Some mills are operating at a loss of 40 -80 yuan/ton.
EAF mills, due to higher production costs due to high scrap prices, were among the first to cut output as they faced losses. Spot rebar prices in Shanghai fell by 650 yuan/ton or 14% from March 14 to 3,700 yuan/mt on May 5, while the Shanghai HRC spot price dropped by 640 yuan/mt or 14% during the same period. same period.
Factories have struggled to tap the seaborne market to offset weak domestic demand. Several large Chinese mills have stopped offering since the end of April due to the gap between bid and offer prices and reduced international steel demand, especially in Southeast Asia where domestic prices are low due to high inventories.
Falling Chinese HRC prices pushed prices down at factories in Vietnam, the largest importer of HRC. Vietnam factory Hoa Phat has reduced its offers for June and July shipments by about $61-62/ton to $611-612/ton for coils of grades SAE1006 and SS400, respectively. Formosa Ha Tinh reduced its offer price for HRC to $640/ton cif Vietnam on April 20, after offering it at $682-692/ton of Vietnamese cif on April 14.
However, the high costs of shutting down blast furnaces and the potential to increase margins or reduce losses due to falling raw material prices mean that not all producers are willing to cut steel output.
China's 62%fe cfr iron ore index was at $102.20 a tonne on May 5, its lowest level since November 30, 2022. The China cfr premium coking coal index was at $239.45 a tonne on May 5, its lowest level since January 21, 2021.
One trader said persistently weak steel demand could not be offset by the cuts. A local steel producer said steel mills also play an important role in the financial performance of local governments, which means the possibility of production cuts is slim, especially since China's economy is weak.
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