CISA calls on Chinese steel mills to reduce capacity utilization

News 2024-03-13 32

The China Iron and Steel Association (CISA) has called on steel mills to reduce production intensity to meet the needs of users and balance supply and demand, according to reports.

According to the industry association, the ongoing decline in the real estate industry and the slowdown in infrastructure construction have led to sluggish demand for steel.

CISA suggests that Chinese steel companies plan production based on steel sales and business performance. The largest producers should take the initiative to reduce inefficient supply, contributing to the smooth functioning of the domestic market.

At the same time, Chinese steel mills should be sensitive to market fluctuations and strengthen their distribution channel management to prevent low-price dumping and unfair competition.

Although the industry association has not released specific figures, market sources believe that CISA’s call will be in line with restrictions announced by local governments recently. In early March, local Chinese steel associations (Yunnan, Guangdong and Shandong provinces) asked mills to reduce capacity utilization by 20-50%. However, this did not have a significant effect – daily steel production by CISA member companies in mid-March (March 11-20) decreased by only 0.51%, remaining at over 2 million tons. Inventories at steel mills continued to be high, at almost 20 million tons as of mid-March.

At the same time, in the first two months of the year, China’s steel industry as a whole suffered a loss of 14.61 billion yuan ($2.02 billion), despite the fact that revenues grew by 2.9% to 1.22 trillion yuan, Kallanish reported, citing the National Bureau of Statistics. The industry is expected to continue reporting losses in March and in the near future.

As Center reported earlier, Chinese steel companies increased steel production by 1.6% in January-February 2024 compared to the same period in 2023, to 167.96 million tons. Average daily steel production for this period amounted to 2.8 million tons compared to 2.18 million tons in December and 2.86 million tons in January-February 2023.