China's pig iron and crude steel production is likely to fall further in mid- to late July as more steel mills in China were forced to cut production due to mounting losses.
Steel cuts are expected to support domestic steel prices, which have fallen sharply since May due to weak demand and oversupply. However, any price pullback could be quite modest as steel mills start ramping up steel production again once profit margins recover, industry sources told S&P Global Commodity Insights.
According to S&P Global calculations based on data from market sources, due to the recently scheduled blast furnace maintenance activities, which are mainly carried out in eastern and northern China, daily pig iron production is likely to decrease between 15 and 31 July at least 40,000 tons per day.
According to S&P Global, as steel mills cut production, profit margins on domestic rebar sales fell from minus $27/t to minus $62/t between July 8 and 15, and hot-rolled coils — from minus 37 US dollars per ton to minus 102 US dollars per ton.
According to the China Metallurgical Association CISA, daily pig iron production in China from July 1 to July 10 fell by 3.3% compared to June to 2.478 million tons. This means that daily production until the end of July can be further reduced by a maximum of 2.438 million tons. However, this level will still be higher than the 2.35 million tons recorded in July 2021.
