On April 19, 2022, the National Development and Reform Commission stated that it will continue to carry out the reduction of crude steel output across the country to ensure that crude steel output does not increase year-on-year.
According to statistics from the National Bureau of Statistics, Anhui and Hubei provinces recorded the largest year-on-year growth in crude steel production from January to March, with an increase of 469,000 mt and 451,500 mt respectively, while Hebei province registered a year-on-year decrease of 15.37 million mt. Due to the tough production restrictions in Hebei from January to March, the province will face little pressure of crude steel overproduction in the future, and there may be more room for production increase. Other provinces are under pressure to control steel production.
In March, China’s crude steel output was 88.3 million mt, a year-on-year decrease of 6.1%. Given that the total crude steel output was 1.03 billion mt in 2021 and 243 million mt in Q1 2022, the output ceiling must be capped at 789 million mt in the rest of this year so as to ensure that this year’s output does not exceed that of last year. As such, the monthly average and daily average output shall not exceed 87.71 million mt and 2.87 million mt respectively.
There will not be much room for steel mills to increase production in the future when compared with March, otherwise they will face stronger pressure from the government to reduce production in the second half of the year.
Since the introduction of crude steel production reduction policy in 2021, the production of domestic steel enterprises and the price of raw materials have been greatly affected.
As the crude steel production reduction target is an annual plan, production plans of domestic steel companies are not likely to change too much in the short term. In general, domestic steel companies will be relatively less affected by output reduction policy in the first half of the year, and domestic crude steel production will continue to rise from March as many steel companies plan to resume operations of blast furnaces.
