Texture from Argus:
Negative margins have forced Chinese steelmakers to cut output by more than 1mn t in August, sending domestic prices higher today.
More than 30 mills in Shandong, Shaanxi, Shanxi, Gansu, Sichuan and Fujian have announced maintenance shutdowns that will cut production by at least 1.15mn t of output in August, equivalent to less than 2pc of China’s monthly run-rate.
Electric-arc furnaces (EAFs) account for most of the production cuts. EAF margins have been squeezed by higher ferrous scrap prices, which have risen partly because of stronger consumption of scrap by blast furnace-based mills that have increased their use of the product to counter higher iron ore prices. Negative margins are a factor in the mill shutdowns, traders said.
The August maintenance cuts come after aggressive pollution controls in north China in June-August failed to prevent the country’s steel production from rising to new record levels.
Meh. Steel inventories are frighteningly high and demand falling. Steel won’t be able to hold on without the stimulus that China just rejected. To the charts:
Spot caught down to reality. Paper rose on the Trump Xmas gift last night. Steel was OK but CISA output for mid-July shows how stupid output remains.
We may get a bear market rally. If so, sell it (not advice)!