BEIJING : 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 has dropped from late March by nearly 11 per cent 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 per cent of the country’s total production.
($1 = 6.9225 Chinese yuan)