According to the latest data from the China Steel Association, the average daily crude steel output in the second half of August reached 2.192 million tons, marking a 0.05% increase compared to the previous month. The daily output in the upper, middle, and lower thirds of August all exceeded 2.11 million tons. It is estimated that the overall average daily crude steel production for August will be around 2.2168 million tons, reflecting a slight rise of 1.04% (or 0.7%) compared to the previous month's actual output.
The rebound in domestic steel prices during July and August helped key steel companies turn losses into profits in July. This, combined with expectations of the traditional "Golden September and Silver October" peak season, has boosted the enthusiasm of steelmakers for expansion. Despite the weak consolidation seen in the domestic steel market since late August, and the fact that iron ore prices have risen more sharply than steel prices—thereby squeezing corporate margins—steel companies have not considered cutting production, which has raised concerns about market stability. According to MySteel Network, the utilization rate of 156 blast furnaces in Tangshan remained at 93%-94% in August, up from 90% in July.
Although the steel market has entered the traditional peak season, the trend of weak consolidation continues. While the Producer Price Index (PPI) fell by 1.6% year-on-year in August, this decline marks the third consecutive month of narrowing losses, suggesting that the industrial economy is gradually stabilizing. Additionally, social steel inventories have been declining for 25 straight weeks, indicating some underlying demand in the market. However, with terminal demand still limited and supply pressures rising again, the steel market may remain stagnant until steel mills adjust their ex-factory prices.
As of September 6, 2013, the national social steel stock in major cities stood at 14.49 million tons, a 1.4% decrease from the previous week, continuing the 25-week downward trend. Meanwhile, the inventory of key steel enterprises reached 12.45 million tons at the end of August. Although this represents an increase of 0.81% from the end of the previous month and 5.05% from the same period last year, it remains at a low level since February.
Tomorrow, the National Bureau of Statistics will release macroeconomic data including fixed asset investment, real estate development investment, and total retail sales of consumer goods for August. In addition, the new round of ex-factory price adjustments from major domestic steel mills are expected to be announced soon, which could break the current consolidation pattern and trigger market volatility. However, the rising crude steel output may cap the potential for a significant price rally in the coming months. Historical data shows that after reaching high levels in the second quarter, domestic crude steel production typically declines in the third and fourth quarters. Given the weak demand expected in the fourth quarter, steel output in September may not surge, but a sharp drop is also unlikely.
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