Chinese Steelmakers To Reduce Steel Output To Maintain Pricing

The government-backed China Iron and Steel Association (CISA) has ordered Chinese steelmakers to reduce output in the aftermath of fast price decreases in order to maintain a stable cash flow.

Domestic steel prices have plummeted, providing significant problems to steel mills, according to a meeting with various steelmakers held on Monday.

On Tuesday, rebar on the Shanghai Futures Exchange fell nearly 11% from late March to 3,685 yuan ($532.32) per tonne.

The meeting was attended by representatives from 16 steelmakers and the CISA, according to a statement posted on the CISA's WeChat account on Tuesday.

Meanwhile, following losses, certain steelmakers in Northwest and North China have undertaken blast furnace repair work, according to information from consultancy Mysteel and Shanghai Metals Market (SMM).

"Mills in these regions have faced significant financial pressure as a result of high steel inventories," said Connie Zhang, steel analyst at SMM.

According to Mysteel, more than 30 steel mills have published maintenance plans as of Tuesday.

According to SMM's latest data, another 15 blast furnaces in China went into maintenance on Monday, cutting hot metal output in April by 615,900 tonnes.

It will be interesting to see if other steelmakers in North, East, and South China follow suit later, according to Xu Xiangchun, director of content at Mysteel.

"We learned that a few mills experiencing losses intend to begin maintenance, but we do not believe the scope of production cuts will continue to expand in the long run, and it will not last long," SMM's Zhang noted.

Mysteel reported that electric-arc-furnace (EAF)-based steelmakers in South China's Guangdong, East China's Zhejiang, and Southwest China's Sichuan cut production last week after incurring huge losses.

Analysts, on the other hand, downplayed the impact of these EAF-based steelmakers' production reduction, pointing out that such output accounted for just around 10% of the country's total output.