China’s record daily output in April spells danger for an embattled global steel industry already reeling from a deluge of exports from the world’s top producer.
Crude steel output over the month rose 0.5% to 69.42 million tons from a year earlier, the National Bureau of Statistics said on Saturday. The gains came after mills ramped up production to take advantage of a spurt in prices that has given them the best profits this decade.
While below March’s record monthly figure of 70.65 million tons, the daily rate of 2.314 million tons was higher due to fewer producing days and surpassed the previous best set in June 2014.
China’s overseas sales in the first four months were already running 7.6% higher than a year earlier, piling on the pressure after the nation shipped a record 112 million tons in 2015.
In a sign that China is recommitting to the reform of its bloated state sector, its top producer, Hebei Iron & Steel Group Co, said on Friday it’ll cut 5.02 million tons of capacity. That still leaves a way to go. Japan’s biggest mill, Nippon Steel & Sumitomo Metal Corp, also said on Friday that it would take control of a smaller domestic steel-maker in a bid to weather a “rapid deterioration of the business environment” caused in part by overcapacity in China of some 400 million tons.
China is exporting its steel surplus as domestic growth slows. Last year’s surge in shipments sparked a rise in trade tensions and battered profits across the world. Casualties of the glut include Australia’s Arrium Ltd, forced into administration, and the loss-making UK operations of India’s Tata Steel Ltd, which are up for sale.
Steel prices in China rebounded in the first four months after five years of losses, lifted by credit easing and an improvement in the property market as the government sought to shore up growth. Speculators fuelled the bonanza in the belief that economic stimulus and industrial reforms would drive up demand and curb supply. At the end of April, regulators and exchanges moved to cool the frenzy and prices have since receded.
April’s figure takes production in the first four months to 261.4 million tons, still down 2.3% on a year ago. China accounts for about half of global supply for the metal used in everything from cars to skyscrapers.