China steel association urges steelmakers to cut output after price drops (updated)

China Steel

25/04/2023 11:40

(Adds background, details and analyst comments)
       BEIJING, April 25 (Reuters) - The government-backed
China Iron and Steel Association (CISA) has urged domestic
steelmakers to cut production following rapid  price drops to
help ensure a stable cash flow.
    Domestic steel prices have sunk, posing severe challenges to
steel mills, it said at a meeting with several steelmakers on
Monday.
    Rebar on the Shanghai Futures Exchange  SRBcv1  has dropped
from late March by nearly 11% to 3,685 yuan ($532.32) a tonne on
Tuesday.
    Representatives from 16 steelmakers and the CISA attended
the meeting, the CISA said in a statement on its WeChat account
on Tuesday.
    Meanwhile, some steelmakers in Northwest and North China
have begun maintenance work on blast furnaces after suffering
losses, consultancy Mysteel and Shanghai Metals Market (SMM)
said in reports. 
    "Mills in these regions have faced great financial pressure
due to high steel inventories," said Connie Zhang, steel analyst
at consultancy SMM.  
    More than 30 steel mills have issued plans for maintenance
as of Tuesday, according to Mysteel. 
    Another 15 blast furnaces across China went into maintenance
as of Monday, reducing hot metal output in April by 615,900
tonnes, SMM said in its latest report. 
    It's worth observing whether other steelmakers in North,
East and South China will follow suit later, Xu Xiangchun,
director of content at Mysteel said.
    "We learned that a few mills suffering losses indeed have
the intention to start maintenance, but we do not think the
scope of production cuts will continue to enlarge in the long
run and it won't last long either," SMM's Zhang added.
    Electric-arc-furnace (EAF)-based steelmakers in South
China's Guangdong, East China's Zhejiang and Southwest China's
Sichuan scaled back production last week after suffering severe
losses, Mysteel said.
    Analysts, however, played down the impact of production 
cuts by these EAF-based steelmakers as such output only accounts
for around 10% of the country's total production.
    ($1 = 6.9225 Chinese yuan)

 (Reporting by Amy Lv and Dominique Patton; Editing by Alison
Williams and Bernadette Baum)
 ((Amy.Lv@thomsonreuters.com;))