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ChinaMaterials | AsiaPacificTracking Steel Production Cuts in China #4:

What's the signal from Poliburo comment ?

Politburo meeting statement on "avoid campaign style carbon cutting movement", what will happen next?The Political Bureau held a meeting on July 30 to make plans for China's economy in the second half of the year. The meeting mentioned: 1) orderly implementing work related to carbon peak and carbon neutrality; releasing an action plan to achieve the target of peak carbon emissions by 2030 as soon as possible; avoiding 'campaign-style' carbon reduction efforts; and containing irrational capacity ramp-up in projects with high energy consumption and high emissions; 2) working on securing commodity supply and stabilizing prices; 3) supporting development in new energy vehicle (NEV); and 4) housing is for living in, rather than speculation.Market worried about slowdown in steel production control in 2H. So far we have tracked a total of seven provinces/cities, accounting for 41% of total China capacity, that have announced cuts. These regions will see 2H21 steel production down 7.4% HoH and 8.8% YoY. As of July 30, the average blast furnace utilization rate at 247 steel mills was 86.83%, down 1.21ppts WoW and down 7.67% YoY, and lower than the 93-94% seen in July 2020, and 91-92% in June 2021.The market became very excited after June's steel production number showed a YoY decline, and several regions announced steel production cut in 2H. The market was expecting full year production to be flat YoY, which implied 2H21 production needs to be cut by 13% or so. With the Politburo's comment, we expect steel production controls will be more gradual paced going forward. The remaining 60% of capacity will likely see more milder cut. We continue to expect 2H21 will see HoH and YoY decline, but full year production to be up 4-5% YoY.