China: Operations at re-bar mills in Jiangsu fall on power-use curbs

Bar-mill capacity utilization among steel producers in East China's Jiangsu, the country's second-largest steel-producing province after Hebei, is seen falling by over one-third this month as more steelmakers in the province halt operations to conduct "intensive" maintenance, according to Mysteel's latest survey. The mills are responding to government directives to tame energy consumption.

The survey across 24 major steel producers in Jiangsu conducted on September 14 found that among the 59 rebar rolling mills the firms operate, 23 have been stopped or are about to be stopped, while another 22 are not producing at full capacity.

If those mills intending to stop for maintenance actually halt as planned, the capacity utilization rate of Jiangsu's rebar rolling mills will fall to 46% within this month, one-third lower than the nearly 70% average in August, Mysteel predicts. The rate will also be close to the level of February 2020 when China's steel industry was faced with stagnated construction steel demand and mounting steel stocks due to the outbreak of COVID-19.

Meanwhile, Mysteel's survey also found that among the 24 mills operating bar-in-coil facilities, nine are suspended or have scheduled maintenance, and another seven have been running below capacity. Their utilization rate will decline to an average of 47.5% this month.

Generally, the duration of the maintenance stoppages is from September 10 to October 15, the survey also found, meaning that most surveyed mills will be observing China's National Day holiday over October 1-7.

Steel mills in Jiangsu mainly produce steel for construction use including rebar and bar-in-coil, with the province's rebar rolling capacity, for example, estimated at 997,300 tonnes/year, accounting for around 22% of China's total, according to Mysteel's data.

Since September 8, Jiangsu government officials have been checking the energy consumption levels of local industries, with steel mills being a priority target, as Mysteel Global reported. The province is among nine provinces and regions in China whose performance in terms of reducing energy consumption and improving energy efficiency was poor so far this year. The provincial government will continue its investigations into large energy users until the end of this month.

"Controlling energy usage has been added on top of Beijing's existing priority goal for the steel industry this year of lowering steel output on-year, so many steel producers have strengthened their efforts to rein-in their production," a market analyst based in Jiangsu stated.

Prior to the directive regarding energy consumption, starting from July Jiangsu steel producers like those in other regions across China had already scaled down production in response to Beijing's other order restraining crude steel output, as reported.

The supply tightness of construction steel due to the enhanced production curtailment is unlikely to be felt immediately by the steel market, but will begin emerging later this month, the Jiangsu analyst maintained. "For now, inventories among steel dealers remain high and demand has yet to recover from the impact of typhoon Chanthu that hit the East China region over September 12-14," she said.

Inventories of rebars at traders' warehouses in East China including Jiangsu totalled 4.66 million tonnes as of September 9, having declined for four weeks in a row, but staying largely at normal levels, according to Mysteel's inventory survey among traders in 132 cities nationwide.

Written by Olivia Zhang, zhangwd@mysteel.com

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