China: Domestic steel prices rise on production cut news in Tangshan

Steel producers in Fengnan district of Tangshan city, China's top steel-producing hub, have been officially required by local authorities to cut their crude steel output by rolling out reasonable production plans throughout the course of this year, making them the first batch of mills in China to observe another administrative on-year reduction in crude steel output after consecutive cuts in 2021 and 2022, Mysteel learned from market sources.

On May 6, steelmakers in Fengnan district received an official document from the local development and reform bureau which said that in order to encourage the steel industry to pursue high-quality development rather than focusing on the old quantity mode, mills in the district will be required to keep their crude steel output this year no higher than that of last year.

Several steel producers in Fengnan district later confirmed to Mysteel that they had received the notice but had yet to make any specific production plans accordingly. Meanwhile, steelmakers in other districts of Tangshan city haven't received any notice from local authorities by now, yet they can't rule out the possibility of receiving such documents later, Mysteel learned.

The news has lent strong support to China's steel market sentiment on Monday, with steel prices in both spot and futures markets rising. For example, the national HRB400E 20mm dia rebar price under Mysteel's assessment gained Yuan 20/tonne ($2.9/t) to reach Yuan 3,835/t including the 13% VAT as of Monday afternoon.

And in China's derivatives market, steel futures prices performed even stronger - the most-traded rebar and hot-rolled coil contracts on the Shanghai Futures Exchange (SHFE) for October delivery jumped 4.2% and 5.1% to close at Yuan 3,732/tonne and Yuan 3,812/t respectively when the daytime trading session ended on Monday.

"The news (of steel output cut in Tangshan) did stimulate the steel market sentiment today and will buoy the market for a while. But whether Chinese steel market outlook will improve still largely depends on market fundamentals and the prices won't increase significantly until steel supply and demand restores balance once again," a ferrous analyst in Shanghai told Mysteel Global.

Written by Zhenqi Yang, yangzhenqi@mysteel.com

Edited by Alyssa Ren, rentingting@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.