Steel prices in China edged up on Wednesday after six sessions of decline, buoyed by expectations that a glut in supply could ease amid falling profit-margins at producers and extended output curbs in the nation’s top steelmaking city.
The world’s biggest steel-producing country churned out 314.96 million tonnes of crude steel in the first four months of 2019, up about 10 percent from the same period last year.
But profit-margins at Chinese mills have fallen sharply in the past few weeks due to the increasing cost of raw materials and waning demand in some downstream sectors, said a manager at a Shandong-based steel company.
“Some steel companies will soon see their balance sheet falling into the red if iron ore prices continue to stay at such high levels. That will force mills to reduce output,” the manager said, declining to be identified as he is not authorised to talk to media.
Meanwhile, China’s top steelmaking hub of Tangshan said it would extend production restrictions on heavy industry to the end of June, local government-backed media reported on Wednesday, as part of its efforts to improve air quality.
Steel mills in Tangshan have been asked to cut sintering operations by as much as 50%, and enforce the same production curbs as during the winter season on their shaft furnaces and converters.
Benchmark Shanghai rebar prices closed 0.7% higher at 3,747 yuan ($542.60) a tonne, snapping a six-session slump.
Hot-rolled coil futures climbed 0.6% to 3,607 yuan a tonne.
The most-active iron ore contract on the Dalian Commodity Exchange gained 0.6% to 719.5 yuan a tonne.
Dalian coking coal edged up 0.2% to 1,378 yuan a tonne, while coke futures advanced just 0.1% to 2,114.5 yuan.
An executive at China’s steel association on Tuesday warned of the risk of an output increase this year and called for steel mills to raise production “rationally” as demand growth is expected to be weak in the second-half of 2019.
Source:Reuters
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