China's hot metal output may drop in July

Average daily hot metal production among the 247 Chinese blast-furnace (BF) steelmakers sampled in Mysteel's regular survey will drop to 2.37 million tonnes (mnt)/day in July, Mysteel predicts in its latest monthly report.

The forecast is based on Mysteel's latest survey that found that next month nine BFs are to be brought back online from maintenance while ten are to be taken offline. Specifically, the productive hot metal capacity to be taken out of service will total 45,600 tonnes (t)/d while that of units being restarted will total only 30,800 t/d.

This contrasts with the situation so far this month, the report noted, where by 25 June, as many as 16 BFs with a total upstream capacity of 69,700 t/d had been reignited, while ten BFs involving a small capacity of 26,500 t/d were blown off for overhauls, the survey results showed.

In fact, in line with Mysteel's estimation last month, the hot metal output of the surveyed mills has inched up overall in June. For example, during 14-20 June, the 247 mills had produced some 2.4 mnt/d of hot metal on average, up by 1.3% from the average 2.37 million t/d during the corresponding week in May.

So far this month, the domestic steel market has shown some signs of resilience, which underpinned the production zeal of steelmakers, market sources observed. But July will usher in the delayed arrival of the low season for steel consumption in summer, and mills could face rising risks of financial strains if they allow their steel products to accumulate without production controls, a market analyst based in Shanghai warned.

"Temporary maintenance stoppages for BF at mills could increase next month if the steelmakers' profitability is hurt," the analyst added.

Although lower hot metal production anticipated next month could weigh on the prices of steelmaking materials like iron ore, only 35% of respondents in another Mysteel survey were bearish on Chinese ore prices in July.

In contrast, as many as 64% still held an optimistic outlook for the iron ore market in the coming month, citing the limited decline expected in hot metal output and possible favourable policies to be unveiled in the plenary session of China's central committee over 15-18 July.

Note: This article has been written in accordance with an article exchange agreement between MySteel Global and BigMint.