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Chinese companies have reduced the volume of steel production

23 June 2016

National Bureau of statistics of China has provided statistical data for may. In accordance with them for a month metallurgists smelted 70.5 million tons of steel. This figure may exceed last year’s figures by 1.8%. In January-February of the current year saw a sharp fall. In the end of steel production for the five month period amounted to almost 330 million tons. The results below last year’s level by 1.4%. In may, the average steel production per day amounted to 2,274 million tons. This level is somewhat lower than in March-April. Apparently, the steel sector has passed the peak level reached in April. It amounted to 2,313 million tons. Apparently, the deterioration in market conditions affected the growth of output. Chinese companies are in no hurry to increase the pace.

More positive news for the market of China is connected with the decision of the authorities of Tangshan. This area accounts for almost 10% of the total steel production in China. The decision also points to the need to reduce or suspend production of steel products. The period of suspension of work is 14.06.2016 for 21.06.2016. The reason was the need to reduce the level of atmospheric pollution. Analysts believe that such measures will lead to a certain limit, steel production in the near future. Also at the level of pig is positively influenced by the decrease in the cost of hire, new standards for energy consumption. The Chinese authorities continue to declare about the upcoming decommissioning of the order of 10% of national capacity. This figure is equivalent to 150,000 tons of steel products per year.

Meanwhile, the decrease in gross profit of Chinese steel producers. According to the beginning of the month market cost of hire has dropped by more than 30% relative to the April high. Production expenses decreased by only 10%. In the end, the gross income of domestic producers fell to almost zero. In April the revenue is greater than USD 123/ton.

Drop the cost of forcing domestic steelmakers to reduce production. Moreover, the process occurs much faster than in 2015. At that time, the stop of excess capacity demanded several months of increasing monetary losses. It is possible that the promise of the authorities regarding the spot of 100−150 million tons of annual capacity are being implemented ahead of schedule.

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