Discover How China's Steel Production Dropped in August and Why Mill Profits Are Taking a Hit

In a surprising turn of events, China's August steel production saw a dip of 4.8% compared to July, as revealed by the nation's statistics bureau. This decrease comes as several steel mills adjusted their production levels in response to tighter profit margins. Despite the month-to-month drop, China, the globe's premier steel manufacturer, boasted an impressive 86.41 million metric tons last month. This is a slight decrease from July's 90.8 million tons but represents a 3.2% year-on-year growth.

Breaking it down further, daily steel production averaged 2.79 million tons in August. While this is a decrease from July's 2.93 million tons, it's still an uptick from August 2022's 2.71 million tons.

Pei Hao from FIS, a brokerage firm based in Shanghai, expressed surprise at the noticeable month-to-month decline. Meanwhile, by the end of August, profitability was seen in only half of China's steel mills, a drop from two-thirds in late July, as per insights from consultancy Mysteel.

A closer look at data from the China Iron and Steel Association (CISA) reveals a 3.2% decline in crude steel production among major steel mills in August, amounting to 66.18 million tons. Xu Xiangchun of consultancy Mysteel emphasized that these significant mills contribute to over 70% of China's overall steel output.

In a broader perspective, China has produced an astounding 712.93 million tons of crude steel from January to August 2023, marking a 2.6% increase year-on-year.

The future of China's steel production cap, introduced in 2021 to curb carbon emissions, remains in the balance. As of now, nine months into the year, no official announcements have been made regarding its continuation. This silence has sparked speculation about its discontinuation, even though the state-owned steel powerhouse, Baosteel, hinted at its persistence.

Rounding off with a forecast for September, Cai Yongzheng of Jiangsu Fushi Data Research Institute expects the month's crude steel output to hover around 89 million tons, as major production cuts are unlikely.

Source : Reuters (Reporting by Amy Lv and Dominique Patton)