This will lead to sustained demand for iron ore ahead of the holidays
Most Chinese steel mills are likely to maintain high production rates during the Lunar New Year, which will lead to steady demand for iron ore. This was reported by S&P Global, citing industry sources.
Earlier, low profitability of steel production prompted steelmakers to reduce production figures amid blast furnace maintenance ahead of the holidays.
Some market participants note that steel mills in North China maintain a 7-14-day supply of iron ore, but can continue to replenish it from ports. Some Chinese steel mills have decided to increase the frequency of replenishment of this raw material, reducing the volume in each round to reduce the impact on the market price.
In particular, a steel mill in Shandong province is going to maintain high production rates, as it expects to complete blast furnace maintenance before the holidays. The company has similar plans in Jiangsu province, as production margins have now increased slightly due to lower prices for ore and coke in the domestic market.
Construction sites in many regions of China will stop working during the New Year break. Some market participants are concerned that high steel production and weak demand for steel products will put pressure on rolled steel prices and potentially reduce production margins. This is likely to affect the operating performance of steel mills after the holidays, and further reduce demand for ore. However, some sources hope that government policies will support steel demand.
As GMK Center reported earlier, China produced 1.019 billion tons of steel in 2023, up 0.6% from 2022. Thus, the downward trend in the country’s steel industry has stopped after two consecutive years of declining production. Rolled steel output increased by 5.2% y/y – to 1.36 billion tons during the year.