Both China’s daily pig iron and crude steel output during the first 20 days of May fell by 1% from the daily average in April to 2.435 million mt and 2.908 million mt, respectively, data from China Iron & Steel Association showed.

          However, steel demand fell even sharper, pushing Chinese steel prices down suddenly. The Chinese domestic rebar prices fell by 16.3% from the start of April to Yuan 3,580/mt ($506/mt) on May 25, data from S&P Global showed.

          China’s steel output cuts are expected to be widened in June-July, as poor demand continues to squeeze mills’ profit margins, according to some traders and mill sources. The Chinese domestic rebar sales margin was minus $14.5/mt on May 24, according to S&P Global data.

          With June-July seen as traditionally a low season for demand, steel mills may also look for output cuts to cap their crude steel production within 2022 levels, some sources added.

          The Chinese government has not yet officially announced its goal for 2023 crude steel output but capping the output in line with the 2022 level is within expectations, some mill sources said.

          “The Chinese government will not set specific dates for steel output cuts in any case, so the steel output cuts are likely to be more market-driven this year,” one mill source said.

          Some mill sources, meanwhile, expected China’s steel prices to rebound in the third quarter amid lower steel output and seasonal demand recovery.

          However, any improvement in Chinese steel prices should be limited, as China’s overall steel demand will continue to be undermined by languishing property steel demand, some traders said, adding that improved profit margins at steel mills will push steel output up again.