International Steel Mills

Virus to Weaken Chinese Steel Production by Just 2.7 Percent in Q1

Written by Tim Triplett

Despite the dramatic impact of the COVID-19 virus on the Chinese workforce and the nation’s commerce, the China Iron and Steel Association forecasts that steel production will decrease by only 2.7 percent in the first quarter. Crude steel production has actually increased by around 3 percent in February.

Analysts warn that China’s steel production is likely to outpace its steel consumption until the virus runs its course, creating a surplus that could end up on the export market, driving down global steel prices.

China’s electric arc furnace mills are currently operating below 20 percent capacity due to tight scrap supplies and low steel prices. If the EAF mills maintain such a low capacity utilization rate, their output will decline by 4-5 million tons in March.

Most of China’s steel is produced by blast furnaces, however, which continue to operate at more than 80 percent of their capacity despite tight supplies of raw materials and finished steel inventories that continue to accumulate.

In total, CISA estimates that China’s domestic crude steel output in March will decline by 5-6 million tons or 7 percent compared to the same period of last year. Cumulative crude steel output for the first quarter will total about 237 million tons, a decrease of 3.5-4.0 million tons, or 2.7 percent year over year.

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