China’s August crude steel output lower, mills profit margins shrink

BEIJING (Reuters) -China’s crude steel output in August fell a sharper-than-expected 4.8% from the previous month, the statistics bureau said on Friday, as some steel mills scaled back production amid shrinking margins.

The world’s largest steel producer manufactured 86.41 million metric tons of the metal last month, down from 90.8 million tons produced in July, but up 3.2% from the same month in 2022, data from the National Bureau of Statistics showed.

Average daily steel output in August was 2.79 million tons, down from 2.93 million tons in July but up from 2.71 million tons in the same month in 2022.

“We did not expect there was such an obvious drop month-on-month,” said Pei Hao, a Shanghai-based analyst at brokerage FIS.

Only half of Chinese steel mills were operating at a profit at the end of August, compared to around two-thirds in late July, data from consultancy Mysteel showed.

Crude steel output among the large steel mills tracked by the China Iron and Steel Association (CISA) declined in August by 3.2% from July to 66.18 million tons, according to a Reuters calculation based on the CISA data.

“The obvious reduction of 3.2% in output among key steel mills last month resulted in a month-on-month decline,” said Xu Xiangchun, director of content at consultancy Mysteel.

Steel production among the key steel mills tracked by CISA account for over 70% of the country’s total, Xu added.

China churned out 712.93 million tons of crude steel in the first eight months of 2023, up 2.6% from the same period a year before, NBS data showed.

The state economic planner has still not confirmed whether it will continue to cap steel output this year to maintain a policy introduced in 2021 to limit carbon emissions.

The absence of any publicly announced directive nine months into the year has stoked doubts that the government would not limit output this year, even though state-owned steel giant Baosteel recently said the cap would continue.

Crude steel output in September will be at around 89 million tons as the likelihood of a large-scale production reduction among steelmakers within the month is low, said Cai Yongzheng, a Nanjing-based director of Jiangsu Fushi Data Research Institute.

(Reporting by Amy Lv and Dominique Patton in Beijing; editing by Miral Fahmy)