The ferrous complex was mixed on November 16, 2021 as spot firmed and paper plus steel fell:
CISA data for early November is out and picked up a little:
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However, that 3.5% rise was enough to lift inventories by 5% so the underlying market clearly cannot take it.
How deep and where the output cuts ahead is an open question:
North China’s Hebei province, the country’s top steel production hub, said steelmakers will be required to implement off-peak production in the heating season from November 15 this year to March 15 next year, which will cut Hebei’s crude steel output in the four months by more than 20% from a year earlier.
The measures will be implemented in two phases – the first phase of November 15 – December 31 this year and the second phase of January 1 to March 15 next year, according to a notice released by the province’s industry regulator and environment authority on Monday.
The plan will cover nine cities in the province, including Shijiazhuang, Tangshan, Handan and Xingtai.
In the first phase, steelmakers will be required to achieve the target of maintaining this year’s crude steel output no higher than last year, and that means they will cut output by 10.75% from a year earlier. In the second phase, steel mills will cut crude steel output by 30%. Combined, they will cut crude steel production by about 18.34 million tonnes or by 22.8% in the heating season from a year earlier.
Hebei province churned out 250 million tonnes of crude steel in 2020, accounting for 23.5% of China’s total crude steel output, making it the country’s top steel production hub.
Unlike previous years when output cut was conducted based on production capacity, this year’s measures will be implemented based on actual crude steel output. “Implementations based on production capacity leaves some obscure room and implementations based on actual output means it will be stricter this year,” said Xu Xiangchun, information director with iron and steel industry consultancy Mysteel.
In terms of the plan’s impact on the steel market, Xu said that it will depend on how steel demand recovers in the first quarter next year and inventories by then, he said.
Mills need to keep cutting. They are racing collapsing demand and losing.
But that will not save steel prices because the more that they cut output, the more prices of raw materials will fall, leading to steel prices falls anyway in a weak market.
The entire ferrous complex price deck is in the process of shunting much lower and nothing but big bang Chinese stimulus, which is not coming, can stop it.