Steel mills around the world reduce production over contracting margins

Steel mills across the world have been opting for production cuts over squeezed margins and prices nearing the bottom. For instance, global hot-rolled coil (HRC) prices have bottomed out to $600/t levels. More than 50 blast furnaces (BF) in China's Hebei and Shanxi provinces have shut down due to declining profit margins.

Chinese HRC prices and SHFE futures have registered a fall in the previous week amid power supply restrictions to industries due to hot weather conditions. However, prices rebounded post the People's Bank of China measure to cut interest rates.

With the recovery in steel demand in early-August, demand was expected to improve, but the prices again started falling keeping production volumes under pressure. Steel output was reduced by 170,000 t per day in Hebei and Shanxi provinces while electric furnaces were shut down in Sichuan province due to restrictions in power supply.

Vietnamese mills, Formosa Ha Tin Steel (FHS) and Hoa Phat, have reduced their hot-strip output amid sluggish demand.

South Korean steel major, POSCO, has planned maintenance of its hot-rolling mill at Gwangyang in October. The duration of the repair works might last longer than the planned period, which will impact production volumes.

In addition, Nippon Steel has also decided to undergo regular maintenance of hot-rolling mill at Kyushu works in September.

The measures adopted to reduce production has expanded to countries like India and Europe as well. Thus, it is becoming a challenge for mills to export with lower profit margins amid appreciation of dollar and hike in interest rate by central banks. So, mills across various countries are opting for repairs to lower their output.

Note: This article has been written in accordance with an article exchange agreement between Japan Metal Daily and SteelMint.