China: Hot metal output may dip in Dec'24 amid tepid steel consumption

• Declining profitability hits output
  
  
• Seasonal declines expected in Dec
  
  

Mysteel Global: After experiencing mild increases in November 2024, daily hot metal production among the 247 Chinese blast-furnace (BF) steelmakers Mysteel regularly tracks is predicted to decline to an average of 2.33 million tonnes (mnt) in December, as tepid steel consumption is seen sapping the mills' keenness for producing.

During November, 14 BFs at the sampled mills - mainly those hosted by makers in North and East China - resumed operations after routine maintenance, Mysteel's survey results showed. However, from the middle of the month, many mills started to rein in their production, culminating in a total of 21 BFs being taken offline during the month.

As a result, the daily hot metal output of the 247 sampled steelmakers averaged 2.35 mnt over 1-28 November, rising by a mere 0.2% from October's average.

The rise in steelmakers' hot metal production last month was much smaller than expected, possibly because steel prices failed to sustain their momentum after Beijing's economic stimulus policies were poorly received. This caused more mills to slip into losses.

Indeed, a growing number of mills have been reporting losses since late October. For example, about 48% of these 247 mills said they were losing money on finished steel sales when questioned on 28 November, higher than the 39% ratio recorded a month earlier.

Meanwhile, December is usually a weak month for steel demand in China, as cold weather slows construction activity. Thus, seasonal declines in hot metal output are expected. Moreover, another Mysteel survey, sampling over 100 companies, including traders and steelmakers across the country, found that Chinese mills are less willing to build their winter stocks this year, with only 37% of surveyed mills expressing plans to do so.

As of now, 12 blast furnaces with a total daily pig iron capacity of 62,000 tonnes (t) are scheduled to be taken offline for overhauls next month. In contrast, only two BFs are expected to restart, bringing back just 17,500 t of daily productive capacity, Mysteel's survey results showed.

In addition, the daily hot metal output among the sampled steelmakers in December could slip below 2.3 mnt if their profitability continues to worsen. The same could happen if the Politburo meeting and the Central Economic Work Conference, both scheduled for December, fail to boost market confidence.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.