Steel output controls may limit China's steel scrap use

With more Chinese steelmakers making plans to reduce their crude steel production to conform with government requests, steel scrap consumption nationwide is expected to decline overall during the second half of this year, Mysteel's latest survey showed. In particular, the country's eastern and central regions are likely to see the most significant declines in scrap use, according to the survey.

Since late July, domestic steel mills have received verbal notifications from local authorities that they should keep their crude steel output this year at or below their 2022 totals, as reported.

Some construction-steel mills in East China's Jiangsu and Shandong provinces have plans to cut their steel production this half by 10-30% from their H1 volume, while some mills in Central China's Henan are also reining-in production, Mysteel Global learned.

During January-June this year, crude steel output in Henan totalled 18.7 million tonnes, higher by 1.4 million tonnes or 7.9% on year, according to data released by the National Bureau of Statistics.

"If the steelmakers in Henan are to comply with the requests to curb production, the province's total steel output this half will decrease by some 4.7 million tonnes or 25.5% compared with the first half," a market analyst based in Shanghai noted. "This will cause steel scrap demand in the province to fall considerably," he added.

Steel scrap use among Henan's steel mills has been staying at a low level this year, with the total consumption during January-June being 17.6% lower on year, according to Mysteel's assessment.

"Most local electric-arc-furnace steelmakers kept their operational rates low when their margins on selling steel were so consistently negative, while some mills also spent a lot of time on maintenance work," the Shanghai analyst explained.

On the other hand, steel scrap demand in other regions including North and South China may not weaken markedly for the remainder of this year, survey respondents suggested. Steelmakers in these regions would face only limited pressures from the production curbs because their steel output during the first six months was little changed on year, they said.

Written by Anthea shi, shihui@mysteel.com

Edited by Alyssa Ren, rentingting@mysteel.com

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