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Special Report: China’s daily output dips, stocks rise - 2 July 2012

China’s daily crude steel output over the second ten days of June fell slightly from the month’s first ten days, China Iron & Steel Association (CISA) data tabled Friday showed. But market watchers noted that, with daily output still close to 2m tonnes, market prices in July will likely hover at low levels with limited upward potential.

According to CISA’s estimate, China’s crude steel output totalled 19.705m tonnes during the second ten days of June, equivalent to1.97m tonnes/day, down 1.4% from the daily average in the first ten days of the month.

As summer is traditionally when steelmakers undertake maintenance stoppages, daily output in June and July is usually below the May average, a Shanghai-based analyst said. However, thanks to the pressures of overcapacity and intense market competition, any decline in output will be limited and do little to firm up steel prices, he said.

Steel industry hopes for improved profitability depend on the central government loosening monetary policies, sources said. These should have a positive effect on the construction and manufacturing sectors during H2.

Other CISA data showed that finished steel stocks held by its 78 member mills totalled 12.15mt on 20 June, up 6% from 10 June. A source with a major eastern China mill said steelmakers’ inventories have generally drifted upwards since early May, but to date the levels have been manageable. Thus, no major mills have announced plans to cut crude steel output.

Tier-one producers such as Shougang, Anshan Iron & Steel, Hebei Iron & Steel, Benxi Iron & Steel and Baosteel have reduced flat steel prices for July to match spot market levels. The mill source said those price cuts will result in losses for some mills, but these would be temporary should demand pick up in autumn as expected.

 

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