China pig iron, crude steel output seen extending decline in Aug as demand slows

China's pig iron and crude steel production is expected to continue declining in August following a drop in July, driven by steelmakers widening output cuts due to weaker demand and elevated inventories.

Slower demand has led to volatile steel prices and thin spot market buying activity. The Chinese domestic hot rolled coil price fell Yuan 30/mt ($4.2/mt) on the day to Yuan 3,430/mt ($479/mt) on Aug. 6, while the rebar price decreased Yuan 20/mt day on day to Yuan 3,230 /mt, after respectively rebounding Yuan 50/mt and Yuan 20/mt from late July, Platts data from S&P Global Commodity Insights showed.

Over July 21-31, China's daily pig iron production averaged 2.247 million mt, down 5.7% from mid-July, and crude steel output averaged 2.667 million mt, 5.9% lower over the same period, estimates from the China Iron and Steel Association showed Aug. 6.

Daily pig iron production in July could fall 3.4% and crude steel decline 3.8% from the June average, according to the CISA.

Despite wider steel output cuts, a reduction in China's finished steel inventories has been slow, indicating lackluster end-user demand, said trade sources.

As of July 31, finished steel inventories at steel mills and major spot markets monitored by the CISA totaled 26.45 million mt, down 1% from July 20, but up 5.4% from the end of June and about 10.7% higher on the year.

Further output cuts

More steel makers planning blast furnace maintenance works could lead to a pig iron output reduction of 1.16 million mt in August from the late July level, according to industry sources.

Some trade sources expect steel makers to widen production cuts later in August amid thin margins, with only modest seasonal demand recovery anticipated in September and the outlook poor for the rest of 2024.

"The key problem for the steel market, I think, is bleak outlook on the steel demand side," a trader said. "Market consensus is that construction steel demand will continue falling in the second half of this year, while the growth of manufacturing steel demand also appears to have slowed, given sluggish consumer spending on things such as cars and home appliances," said a trader.