China's July pig iron output down 8.9% on year

China's pig iron ore output posted an 8.9% on-year decline in July to reach around 72.85 million tonnes, according to the new data released by the country's National Bureau of Statistics (NBS) on August 16. The volume was also down by 3.9% from June and marked the second straight monthly fall.

Last month's decline meant that the pace of growth in output recorded over January-June of 4% slowed during January-July to 2.3%, the NBS data show. The pace was also much lower than the 8% on-year rise in the country's crude steel output over the first seven months, even though crude steel last month shrank by a large 8.4% on-year. The fall in steel output last month brought an end to the continuous climb begun in April 2020, the data also showed.

The volume of daily pig iron production last month declined to 2.35 million tonnes/day, 7.5% lower than the average in June and a new low since last March, Mysteel Global calculated based on the data.

"It is not surprising to see the pig iron output decline in July, as we had seen many steelmakers trim their output during the month," a Shanghai-based analyst commented.

In fact, at the beginning of the July, many steelmakers in North and East China were just about to ramp up operations after having to limit their activities during June 28-July 1 when Beijing hosted celebrations for the centenary of the founding of the Communist Party of China on July 1.

However, the crank-up was soon interrupted by Beijing reemphasizing the need for the steel industry to lower this year's steel output from 2020, prompting many domestic steelmakers to start to control their production in order to comply with the directive, as reported.

Mysteel's data showed the same trend, with the blast furnace capacity utilization rate among the 247 blast-furnace mills surveyed across China first recovering to 88.55% as of July 15 from 81.01% on July 1, before easing to 86.83% by July 29. The rate finally averaged 87.36% in July, down 1.53 percentage points on month.

The changed fundamentals had a huge impact on market sentiment albeit in opposite ways, Mysteel Global observed.

On the one hand, the likelihood of reduced steel supply led domestic steel prices to strengthen, with the national price of HRB400E 20mm dia rebar under Mysteel's assessment, for example, rallying by Yuan 540/tonne ($83.4/t) from end-June to reach Yuan 5,479/t including the 13% VAT as of July 30, a new high since May 20.

However, on the other hand, the certainty that iron ore demand will decline during this half-year saw iron ore prices fall last month from their previous highs, with the Mysteel SEADEX 62% Australian Fines index losing $36.8/dmt on a month to $180.2/dmt CFR Qingdao by July 30 - a new low since May 26.

Written by Victoria Zou, zyongjia@mysteel.com

This article has been published under an article exchange agreement between My steel global and SteelMint.