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Chinese crude steel production hits monthly record
Nikkei staff writer reported that China's steel output is picking up pace due to greater infrastructure investment and the crackdown on illegal production, creating worries for the global steel market and stoking uncertainty about President Xi Jinping's efforts to bring the country's overcapacity to heel.
According to the National Bureau of Statistics of China, Crude steel production in China hit back to back monthly records in March and April. In March, production rose 1.8% over the previous month to 71.99 million tonne, and in April it shot up 4.9% to 72.78 million tonne. The April figure is a pace of 2.42 million tonne per day, or 885 million tonne a year, and would represent an increase of 77 million tonne from 2016, besting South Korea's production of 69 million tonne.
Strong investment was the biggest factor. From January to April, infrastructure investment soared 23.3% compared with a year earlier, and real estate development investment climbed 9.3%. Both fields require a lot of steel. The Communist Party's National Congress, where new leadership is appointed, is approaching in the fall and regional leaders are trying to bolster their reputations by boosting national gross domestic product.
Another factor is the crackdown on production that melts scrap and remolds it. Such steel is illegal due to environmental and other reasons but rural areas have continued to produce it. Yearly capacity is estimated at 100 million tonne and output at 30 million tonne. Starting last year the Chinese government began closing down such facilities, even going so far as revealing the officials of the offending regional governments. It is possible that crude steel is making up for that reduction.
Currently, Chinese steel exports are falling due to high domestic consumption. Until April, exports had fallen year on year for nine straight months. Price differences between rebar, steel plate and other product types have varied widely. Prices over that span were about 20-70% higher than the same period a year earlier, but have come down 10-20% from the most recent peak in March.
Concerns about the global steel market are mounting in Europe, Japan and the US. The Chinese government has tightened money over worries about a real estate bubble, and many believe the country's economy will slow in the second half of the year. If China begins cheap steel exports again, steelmakers in developed nations may suffer.
Source : Nikkei staff