Chinese Steel Production Inches Down. June Chinese steel production in at 1.79 million tonnes per day (mtpd), a 0.9% decline from May – but still the third highest level of all-time. This means that total steel production is down a nominal 2.9% from the peak in May. Due to an additional day in May vs. June, production for the month of June reported a drop of 4.1%, for the second highest monthly total in the history of the Chinese steel industry.
Same Old, Same Old – More Talk Than Action. The tiny sequential decline in average daily output is nominally good news – better than an uptick – but sobering to realize that with pricing down some 15% in the region – in the face of higher costs – production is down a nominal 4% from peak. We are stunned by the lack of financial good sense by China’s high cost steelmakers who continue to turn gold into straw – producing high cost steel at a breakneck pace and accelerating exports to post-recession highs in order to funnel the overproduction back into the global market. Perhaps a better strategy for the Chinese steel industry would be to take 10% of their high-cost imported iron ore, and auction it off at a 10% loss – that would save a great deal of time, effort and energy rather than importing iron and exporting steel.
Outlook - More Concerned Than Encouraged. We hope the trend of lower production will continue, but even so, we are quite concerned about the increase in exports the last two months. While we hope to see less export incentive with the rebate reductions, we’re cynical for the time being, because without production cuts exports will likely continue high.