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China’s daily output still over 2m t/d as capacity grows - 27 April 2012

China’s daily crude steel output during the second ten days of this month was estimated at 2.005m tonnes/day, down 1.26% from the first ten day’s 2.031m t/d, according to China Iron & Steel Association (CISA). Market participants believe steel output will stay at high levels through quarter two which usually sees stronger demand than the first and third quarters.

However, as overcapacity has grown in the Chinese steel industry this year and demand growth has slowed down, the production ramp-up will easily overpower any demand recovery and smother steel price rises, some traders told Platts Steel Business Briefing.

CISA recently estimated the country’s total crude steel capacity as high as 900m tonnes/year, or 2.466m t/d, at end-2011. Current daily crude steel output leaves capacity utilisation at about 81%, which still leaves some room for output to rise further should steel prices show rise again, Platts SBB understands.

Meanwhile, some industry analysts said overcapacity could last for years as more crude steel capacity is coming on stream.

Beitai Iron & Steel, a core subsidiary of Benxi Iron & Steel (Bengang), plans to commission a new blast furance around August this year, adding about 2m t/y of ironmaking capacity and boosting Bengang’s total crude steel production capacity to around 20m t/y.

This new blast furnace is intended to fix Beitai’s crude steel shortage problem. Beitai currently has about 8m t/y crude steel capacity but, since it commissioned a 4m t/y hot strip mill in 2008, finished steel capacity has been about 10m t/y.

 

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