China Slashes Steel Output as Industry Sounds Alarm on Demand

By Bloomberg News

August 15, 2024 at 12:21 PM GMT+10

Chinese steelmakers slashed output last month as woeful demand forced steep cuts on an industry contending with a collapse in margins.

Steel production in July plunged about 9% on both the month and the year to 82.94 million tons, the lowest figure reported in 2024, according to the statistics bureau on Thursday. That leaves the total over the first seven months at 613.72 million tons, 2.2% off last year’s pace.

The protracted downturn in the real estate market and shrinking factory activity have pushed domestic prices sharply lower and unleashed a flood of Chinese metal onto world markets. The nation’s top steelmaker warned on Wednesday that the industry is facing a crisis more severe than the downturns of 2008 and 2015.

There’s been little respite in the bad news emanating from the property sector. Construction starts are the steel market’s main pillar of demand, but new home sales are in a prolonged funk and foreclosures are mounting, offering few incentives for developers to build afresh. Home prices continued to fall in July, albeit at a slightly slower pace, the statistics bureau said.

At the same time, the government has been unwilling to offset the weakness by ramping up spending on infrastructure. The upshot is that Chinese steel consumption may contract as much as 3% in 2024 following a similar decline last year, according to Bloomberg Intelligence.

The steel industry has been plagued by overcapacity for years. In an effort to rein in emissions, Beijing has been trying to cap production at or below the previous year’s level after output ballooned in 2020 to well over 1 billion tons. That task is likely to be easier this year as supply discipline is forced on mills looking to rescue their margins. It could also offer some relief to the countries grappling with the impact of cheap Chinese exports on their domestic markets.

— With assistance from Jason Rogers, Dan Murtaugh, Kathy Chen, Sarah Chen, and Winnie Zhu