There is a high level of utilization of blast furnace capacities in the country
Chinese steel mills are likely to maintain high production rates until the end of July 2023 thanks to positive profitability. This is evidenced by S&P Global research, conducted among 37 large enterprises operating blast furnaces (BFs) in different regions of the country.
The positive profitability of steel production helped the steel mills to maintain a high level of blast furnace capacity utilization. According to the survey, if there were no recommendations for production cuts from the authorities, plants would be unlikely to take this step in July. Meanwhile, domestic demand remains subdued due to extreme weather conditions in most Chinese cities.
At six out of 37 enterprises, they stated that they had plans for maintenance of blast furnaces in July or had already performed it at the beginning of the month. The two steel plants are also going to carry out maintenance of production lines during July, which was taken into account in the annual production plans. Only one of the factories had an unscheduled repair of the blast furnace due to technical factors, but this only slightly affected production.
The reduction of agglomeration capacity in Tangshan has had little effect on the demand for iron ore fines in the city. According to one of the sources, this is a city policy related to reducing pollution, and there is currently no clear end date. Steel mills in Tangshan had varying percentages of production reductions.
Some steel mills in central and northeastern China said they had lower production margins due to higher raw material prices and lower steel prices. While iron ore purchases by Tangshan mills fell slightly, others trading from northern China ports saw strong demand. A high margin on iron ore imports supported buying activity on the sea transportation market.
Short supply of Pilbara Blend Fines iron ore at ports in northern China late last week, S&P Global notes, has led to a wide spread in commodity prices between the country’s north and east. The PBF price spread was RMB 20-25/t FOT, while the typical was RMB 15/t.
As GMK Center reported earlier, level of use blast furnace capacity of China among 247 Chinese steel plants during June 23-29, 2023, increased by 0.38 pp compared to the previous week – up to 91.98%, reaching an annual maximum.