China’s crude steel output in June fell 3.9% from May and posted the largest annual decline of 9.2% since last August, as more steelmakers carried out equipment maintenance amid a seasonal low in demand and a national plan to cut output.

The world’s largest steel producer manufactured 83.18 million metric tons of crude steel last month, the lowest level for a single month so far this year, data from the National Bureau of Statistics showed on Tuesday.

“The dramatic fall might be mainly driven by a big reduction in output from the electric arc furnace due to sluggish demand from the construction sector and higher production costs,” said Cai Yongzheng, a Nanjing-based director of Jiangsu Fushi Data Research Institute.

Average daily output in June hit its lowest since last December at 2.77 million tons, down 0.7% from 2.79 million tons in May, according to Reuters calculations based on the data.

High temperatures in northern regions, as well as heavy rains in eastern and southern areas, curbed outdoor construction activities, denting demand for steel products.

Some mills started annual maintenance on equipment, resulting in lower output.

Daily hot metal output averaged 2.42 million tons in June, down 0.8% from 2.44 million tons in May, according to a Reuters calculation based on data from consultancy Mysteel.

Additionally, mounting anti-dumping duties against Chinese steel products from major export destinations have added to demand uncertainty, with steel exports already showing signs of softening last month.

China’s steel exports in June slid by 8.5% from May to a four-month low of 9.68 million tons, customs data showed on Monday.

A hike in U.S. tariffs on steel from China has so far had limited impact on China’s direct steel exports, said Wang Yingsheng, vice chairman at the state-backed China Iron and Steel Association, as cited in a note by Mysteel on Saturday.

But the levies could threaten exports down the track as some of the biggest suppliers of imported steel to the U.S. are buyers of Chinese steel, he added.

“High steel exports seen in the first half may not sustain in the second half, and domestic demand is likely to fall,” Mysteel quoted Wang as saying.

Beijing unveiled plans in March to restructure the giant steel sector via output cuts this year, but has not disclosed essential details, including the time and scale of the curb.

For the first half of the year, output totalled 514.83 million tons, down 3% year-on-year.
Source: Reuters