China: Top 7 crude steel-producing provinces see 6% output drop in Jan-Aug

Morning Brief: China's top seven crude steel-making provinces showed a 6% y-o-y drop in production over January-August, 2022, as per data maintained with SteelMint. The volume in the first eight months of CY2022 dropped to 693 million tonnes (mnt) from 735 mnt in January-August, 2021.

Amongst the seven provinces, Hebei is the largest producer. Its production volume dropped 6% to 148 mnt in the period under review from 158 mnt in the corresponding period last year (CPLY).

The province that experienced the highest drop was Shangdong. Its volumes dropped 15% to 48 mnt in this period (against 56 mnt in CPLY).

The second-highest drop was seen in Liaoning. Output here dropped 8% to 49 mnt (53 mnt), followed by Hebei.

Jiangsu, the second-largest province in China, and contributing over 10% of China's total crude steel production, houses numerous electric arc furnaces (EAFs). Its crude steel production dropped 3% y-o-y over January-August.

Reasons for the drop in production

1. Decarbonisation drive: The Chinese government has decided to maintain an annual decline in its crude steel production to reduce the carbon footprint. It has decided to keep its 2022 crude steel output at levels lower than 2021's. The world's top steel producer had reduced 2021's production by around 30 mnt to 1.035 billion tonnes (bnt) against 1.065 bnt in 2020.

2. Lockdown blues: China had been in the grip of Covid on and off in 2022 which led to severe lockdowns and thus a drop in domestic demand as well as production.

3. Realty sector crash: The country's real estate sector crashed with the collapse of real estate giant Evergrande late last year. Since then, the real estate construction sector, which is the largest consumer of steel along with infrastructure, has been beset by trouble. Real estate launches and construction both have been in negative territory, especially since March 2022. This had dented China's domestic steel demand, aiding the production cuts.