Market participants added that ensuring economic growth and stable employment remains the country’s top priority, therefore, similar to 2023 and 2024, government-mandatory crude steel production cuts may not be strictly enforced in 2025.
Other sources said that to ensure blue skies for the Beijing military parade on Sept. 3, production at some rolling mills and coking plants in nearby Hebei and Shandong provinces may be slowed during Aug. 25- Sept. 3.
So far, local mills have not been notified that they need to reduce pig iron and crude steel production ahead of the military parade.
“Currently, steel mills are all making decent profits, so even if northern steel mills are forced to reduce production due to weather conditions before the parade, their output should quickly recover afterward,” a trading source said.
Steel mills’ profit margins have improved recently, mainly due to rising steel markets driven by capacity and production cut expectations.
But in fact, it is unlikely that capacity reduction will occur this year, and the improved profit margins have now made steel mills further unwilling to reduce production, and some are even keen to increase the output of certain products.
The domestic profit margins for rebar and HRC rose to more than Yuan 200/ mt ($27.80/mt) in early August, up from about Yuan 150/mt in late June, market sources said.
In tandem, China’s rebar production as of Aug. 7 increased by 11.8% from the start of August, and 31% higher year over year, according to the sources. The HRC production was also about 4% higher year over year as of Aug. 7.
The average utilization rate at China’s blast furnaces was at 90% as of Aug. 8, around three percentage points higher year over year, said a market watcher.
Market talks suggest the Chinese government has planned to reduce its 2025 crude steel output by 50 million mt from 1.005 billion mt in 2024.
But based on current situations, the decline of the annual crude steel output in 2025 could be modest, and the steel market may remain under pressure of oversupply in the second half of this year, the sources added.
