The China Iron and Steel Association (CISA) has recently advocated for a substantial decrease in steel production across China’s steelmaking industry. This recommendation is part of a broader initiative to stabilize and systematically develop the iron and steel sector in a balanced manner. CISA’s appeal is encapsulated in their proposal titled “Recognizing the situation and maintaining determination to jointly maintain the stable and orderly development of the iron and steel industry.”
This push for reduction comes in response to persistently weak demand for steel, primarily due to the ongoing contraction in the real estate sector and a slowdown in infrastructure projects. CISA emphasizes the necessity for steelmakers to align their production levels more closely with actual market needs, aiming to achieve a dynamic equilibrium between supply and demand.
Despite previous calls for cutbacks in production intensity, which saw local steel associations in Yunnan, Guangdong, and Shandong mandate reductions in utilization rates of 20-50%, the impact on overall steel output has been minimal. Reports indicate that between March 11-20, daily crude steel output of CISA members dipped merely by 0.51%, with production levels still exceeding two million metric tons per day. Moreover, inventory levels remain critically high, hovering around 20 million metric tons in mid-March.
Market insiders suggest that CISA’s new directive could entail slashing production by up to 40% nationwide. This strategic reduction is aimed not only at addressing the surplus in supply but also at preventing mills, which had temporarily ceased operations for maintenance, from resuming full-scale production too swiftly.
The association has not yet provided specific numerical targets for these reductions. However, industry observers anticipate that the implementation of these measures will align with recent local governmental restrictions, ensuring a more pronounced and effective reduction in steel production moving forward. The overarching goal of these initiatives is to foster a more sustainable and economically viable steel industry in China, responsive to the ever-changing dynamics of global and domestic markets.
