“The year-on-year decline was largely the result of more frequent and stricter emergency production curbs imposed on many steel mills last month – especially those in North and East China – aimed at reducing air pollution,” a Shanghai-based analyst commented.
Indeed, the emergency curbs on steel mills’ steelmaking operations were rather tough in North China – lasting from the end of September to around October 3 – mostly to ensure clear skies for the National Day holidays, especially for events to mark the country’s 70th anniversary on October 1.
Thus, during some specific periods, most Tangshan-based steel mills in Hebei, North China, had to halt all their sintering and pelletizing operations and most blast furnace operations. Moreover, there was no quick recovery in steel production in Tangshan after this round of curbs.
And when weather forecasts suggested that atmospheric pollution could intensify at times during October 15-25 in some areas in North and East China, emergency production curbs were once again imposed, frequently disrupting many mills’ steelmaking operations in these areas, as Mysteel Global reported.
According to Mysteel’s survey among the 247 blast furnace steel producers it checks nationwide, their blast furnace capacity utilization rate over the September 27-October 3 week dropped to an all-time low of 70.33% when Mysteel conducted this survey in March 2018, and over September 27-October 31 averaged 76.2%. This compares with the higher level of 82% recorded for the August 23-September 26 period, and the 81.79% average over September 28-November 1, 2018.
Last month’s reduction in pig iron production also affected Chinese crude steel output. NBS data released on Monday showed that raw steel output last month, in parallel, saw its first year-on-year decline, dipping by 0.6% from October 2018 to reach 81.52 million tonnes. This compares with the year-on-year growth in September of 2.2%, Mysteel Global notes.
The continuing decline in domestic steel output largely dampened raw materials procurement among steelmakers over the period too, which led raw materials prices to stumble, especially those of iron ore.
Mysteel’s pricing index for 62% Australian iron ore fines in seaborne cargoes, for example, had softened to $84.25/dmt CFR Qingdao on October 31, down by $9.55/dmt from September 30.