The Chinese steel production jumped higher by 5.7% as steel mills in the country ramped up production to reap the benefits of high steel prices.

The steel output by China surged to hit new record during the month of June this year. The monthly output totaled 73.2 million tonnes in June 2017, surpassing the previous record monthly production of 72.8 million tonnes reported in April this year. The country’s steel sector has achieved production record amidst efforts by the administration to curtail illegal and loss making capacities.

The Chinese steel production jumped higher by 5.7% as steel mills in the country ramped up production to reap the benefits of high steel prices. For instance, Shanghai steel rebar is currently trading at its highest level since end-2013. The cumulative steel output during the initial six months of 2017 totaled around 420 million tonnes, 4.6% higher when compared with the output during the initial half of 2016. Going by the current rate of production, the annualized production is projected to touch 891 million tonnes in 2017.

The sharp rise in production is amidst government's steadfast efforts to curb excess steelmaking capacity in the country. The administration had earlier laid out a target to close between 100 and 150 million tonnes of steel making capacities over a period of five years. According to estimates, nearly 65 million tonnes were passed out last year. Another 42 million tonnes of capacity have already been phased out during the initial five months of 2017. The target set for the year was 50 million tonnes, which implies that the country has already achieved 85% of the production cut target for the current year.

Meantime, China's exports of steel products have declined by 2.4% over the previous month to 6.81 million tonnes in June. The trade restrictions imposed by overseas countries coupled with strong domestic prices have made traders focus more on local markets, thereby reducing shipments out of the country. Over the initial half of 2017, Chinese steel products exports have fallen significantly by over 28% year-on-year.

In line with rising steel output, the country's imports of iron ore too rose sharply in June. The imports during the month totaled 94.7 million tonnes, significantly higher when compared with the imports of 91.5 million tonnes during the month before that. According to customs data, the imports during the first half of the year were up by 9.3% to 539 million tonnes when matched with the corresponding half-yearly period in 2016. Analysts forecast that the country's full year imports of the steel making raw material are likely to reach 1.08 billion tonnes in 2017. It must be noted that the imports had totaled 1.024 billion tonnes in 2016.

Source: Scrap Monster