March Chinese Steel Production Slips 1.2% from February's Record

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Includes: AKS, BHP, CLF, NUE, RIO, RS, STLD, WOR, X
by: Michelle Galanter Applebaum

Steel Market Intelligence©

March Chinese Steel Production Slips 1.2% from February’s Record

  • March Chinese Steel Production Posts Surprising Drop. We were surprised to see a decline in March Chinese steel production, which fell a nominal 1.2% to 1.92 million tonnes per day (mtpd) from February’s record 1.94 mtpd. We had actually anticipated an increase in the month despite visible maintenance outages early in the month with production restored by mid-month.
  • Quick Supply Response Encouraging. What was interesting about the data, was that to our recollection, this was seemingly the quickest supply-response to declining prices – which started in mid-February. With exports doubling in the month, the Chinese clearly used the “export supply relief valve” to address overcapacity, but clearly also cut production, which is encouraging for future steel market health. The press has incorrectly focused on full-month production, which rose 9.4% to 59.4 mt in March; because steel is produced 24/7, comparing months with different days is misleading, especially the months of February and March.
  • Outlook. Despite some encouraging signs from the March data, we expect April steel production levels to rise to record or near-record levels, as steelmakers are likely to ramp up production in response to late March’s strengthening in steel prices and large steelmakers that reportedly cut production in March are set for increases this month. Although Chinese steel prices have strengthened over the past few weeks, with production continuing to ramp up, we see the risk of continued further acceleration of exports.

Disclosure: I am long NUE, RS, CLF.