China crude steel output falls for 2nd month in July on negative margins
July output down 9.5% m/m, down 9% y/y
January-July output down 2.2% y/y
August output to be slightly lower than July-analysts
Adds bullets, milestones, August output outlook
By Amy Lv and Colleen Howe
BEIJING, Aug 15 (Reuters) -China's crude steel output fell in July for a second month, declining by 9.5% from June, official data showed on Thursday, as many steelmakers carried out maintenance work amid a widening of already negative margins.
The world's largest steel producer made 82.94 million metric tons of crude steel last month, data from the National Bureau of Statistics (NBS) showed, down from 91.61 million tons in June.
July output, the lowest for a single month since December 2023, was down 9% from a year earlier, the data showed, surprising analysts who forecast a modest annual fall.
China's steel producers cut output in late July and early August because margins were negative, said Atilla Widnell, managing director at Navigate Commodities, before the data was released.
"Chinese steel mills have responded to severely negative margins and the mass liquidation of old-specification nationwide rebar inventories, driven by upcoming new national quality standards by significantly reducing output over the past four weeks," Widnell said.
On June 25, China announced mandatory rebar standards to replace voluntary guidelines that were set to go into effect from Sept. 25, prompting some panic selling of old inventories that pressured steel prices and further squeezed steel margins.
That, coupled with signs of weakening steel exports, was another blow to steelmakers already hit hard by dwindling demand amid a persistent property market downturn.
Steel prices SRBcv1 fell 6.5% in July. Only about 15% of steelmakers surveyed by consultancy Mysteel were operating at a profit by late July, compared to around 43% in late June.
Also, more steel mills cut production after hopes of further government stimulus from two important meetings in July evaporated.
In July, daily output averaged about 2.68 million tons, compared with 3.05 million tons in June and 2.93 million tons in July 2023, according to Reuters calculations based on the NBS data.
Output over the first seven months of 2024 fell 2.2% from a year earlier, widening from a drop of 1.1% over January to June, to 613.72 million tons, according to the NBS.
Output in August is expected to fall from July levels as an increasing number of steelmakers are undertaking equipment maintenance after persistently falling steel prices have enlarged their losses, according to analysts.
But they said the pace of the decline was likely to slow due to the low base in July.
Only around 5% of steelmakers were making a profit as of Aug. 9, Mysteel data showed.
Reporting by Amy Lv and Colleen Howe; Editing by Kim Coghill, Christian Schmollinger and Jamie Freed
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