China’s crude steel output climbed last month as the world’s biggest producer continues to churn out supply in defiance of complaints that it is swamping the global market.
Output rose to 70.5 million tonnes, up 1.8 percent year-on-year and 1.6 percent higher than in April, the National Bureau of Statistics said yesterday.
The figure is just below March’s record 70.65 million tonnes and brings the total for the first five months to 330 million tonnes, down 1.4 percent from the same period last year. China accounts for about half of the global supply for the metal used in everything from cars to skyscrapers.
Photo: AFP
Steel prices in China flipped from bull to bear market last month following a 29 percent slump in the Shanghai benchmark for reinforcement bar from its April high. The collapse came after regulators and exchanges stepped in to cool excessive speculation and supply expanded as mills fired up capacity to capture thicker margins.
“Many mills have brought back idled capacity or simply expanded existing production to take advantage of good profits in previous months,” Mysteel Research Beijing-based chief analyst Xu Xiangchun (徐向春) said.
Those steelmakers are not able to immediately dial back production, BOCI Futures Co (中銀國際) analyst Lv Xiaohua (呂肖華) said, adding that “output will remain at elevated levels for some time as long as mills have positive cash flow.”
China’s fading infrastructure boom has left it saddled with too much capacity after decades of rapid growth. While production last year shrank for the first time since 1981 as demand contracted, supply still far outstrips domestic needs. The nation is exporting its surplus at record rates, drawing the ire of international rivals.
Competitors from India to the EU have raised trade barriers and China’s industrial overcapacity has been singled out as a global problem and provoked criticism from Japanese Prime Minister Shinzo Abe and US Secretary of the Treasury Jack Lew.
Chinese Premier Li Keqiang (李克強) said conflict over China’s steel production has been blown out of proportion, after meeting with German Chancellor Angela Merkel in Beijing yesterday, adding that the nation does not want a trade war.
China has pledged to reduce capacity by as much as 150 million tonnes through 2020.
Cutting capacity to moderate production remains a long-term effort, Chinese National Bureau of Statistics spokesman Sheng Laiyun (盛來運) said at a news conference after the data were released.
Aluminum production in China rose to 2.68 million tonnes last month from 2.57 million tonnes in April, and 2.67 million tonnes in the same period last year, according to the data.
Output declined 1.7 percent annually in the first five months to 12.62 million tonnes.
Chinese smelters, which had pledged to slash production to bolster prices, are bringing back idled capacity after prices rebounded this year.
With most producers in the world’s largest supplier enjoying solid margins, output growth will accelerate to 4 percent year-on-year in the second half, Goldman Sachs Group Inc said in a report this month.
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