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China's crude steel output at record high in April

15 May 2018 06:47 (+01:00 GMT)
China's crude steel output at record high in April

Singapore, 15 May (Argus) — China's crude steel output hit a record high in April, as steel mills boosted production after winter output curbs were removed on 15 March.

Crude steel output in April was 76.7mn t, up by 4.8pc from a year earlier and 3.76pc higher than the previous month, according to the national bureau of statistics. The previous high was 74.59mn t recorded in August 2017.

Daily crude steel output was 2.55mn t compared with 2.38mn t in March. The daily crude output rate for 2017 was 2.28mn t.

China had imposed a 50pc reduction in pig iron output in 26 cities during 15 November-15 March to reduce emissions. Currently only two major steel-producing cities are still operating under some restrictions, with Tangshan mills told to cut pig iron output by 10pc until November 2018 and Handan enforcing a 25pc reduction in pig iron output until November.

Steel mills have boosted profits since late April with average margins of around 700-1,000 yuan/tonne ($126-158/t) compared with Yn400-600/t in March. Construction demand has picked up, with projects seeking to complete as much work as possible before the wet season begins next month.

Cumulative January-April crude steel output was higher by 5pc at 288.97mn t. Pig iron output in March was lower by 0.4pc from a year earlier at 63.11mn t, while January-April output was down by 1.2pc at 238.78mn t. Increased scrap use in the basic oxygen furnace during the blast furnace-based steel production process, as well as more production of steel in electric arc furnaces to reduce emissions may have contributed to the fall in pig iron output.

Profitability of the steel sector was supported by the firm performance of the manufacturing sector. Manufacturing output increased by 7pc from a year earlier in April compared with 6pc in March. Equipment manufacturing and automobiles, key consumers of flat steel products, were the fastest growing sub-sectors last month.

Real estate investment growth remained robust at 10.3pc from the previous year during January-April, marginally lower from 10.4pc in January-March. The fast pace of real estate investment growth has surprised many since the property market was expected to slow down this year because of home purchasing curbs applied by local governments in large cities. These investments will boost steel demand over the next several months as new projects enter their construction stage.

New real estate project starts grew by 7.3pc during January-April compared with 9.7pc for January-March and 2.9pc in January-February. Real estate sales in terms of area grew by 1.3pc, slowing from 3.6pc in January-March. Housing sales growth has been much slower than investment growth this year, which could lead to an inventory build-up later in the year if the trend persists. Real estate inventories fell by 16pc during January-April compared with a 16.7pc reduction for January-March.

The rate of investment growth in fixed assets has fallen through the year, with a growth rate of 7pc during January-April compared with 7.5pc for January-March and 7.9pc in January-February. Infrastructure investment growth during January-April was at 12.4pc compared with 13pc for January-March. Beijing's directives on curbing government debts could have slowed spending on some projects by provinces, although infrastructure remains a key driver of steel demand. A new city being built near Beijing, ambitious projects to rebuild shanty towns and lay new railway lines and increased spending on overseas infrastructure building as part of the Belt & Road project will continue to consume additional steel this year.

Credit availability was ample in the economy, with new loans by banks in April rising by Yn79.7bn from a year earlier to Yn1.18 trillion. Lending to government and industries increased in this period, while loans to households, mostly home mortgages, dipped.