Another record drop in Chinese steel output has spooked many in dry bulk.
China’s
National Bureau of Statistics has issued figures showing steel
production falling to a four-year-low in September, lows not seen since
December 2017, and helping explain why volatile cape freight rates have
fallen from $80,000 to $60,000 in the space of a fortnight.
China’s
steel mills produced about 73.8m tons last month, down by 11.4% from
August and 21.2% from the year before as real estate concerns grew and
Beijing clamped down on polluting heavy industries while grappling with
power shortages rolling across the world’s most populous nation.
“As
the ongoing energy crisis forces most of the industrial sector in the
country to operate at a reduced capacity, average steel capacity
utilisation in the country fell to 83.5% in September, down from 85.3%
in August,” brokers Braemar ACM stated in a note to clients, adding: “A
slowing Chinese economy, particularly in primary industries, has hurt
sentiment in the country’s steel industry, exacerbated by the tumults of
the Evergrande Real Estate Group.”
When looking at the
statistics, analysts at Lorentzen & Stemoco noted today that the
reductions seen in late summer and autumn have been so steep that this
year’s annual increase is about to dwindle drastically. Whereas the
first half of the year started with annual gains of 10.8%, the increases
for the first nine months of the year are down to a mere 2.8%
“There
is a parallel between China’s reduced refinery throughput and steel
production in recent months,” Lorentzen & Stemoco argued today in a
note to clients. The authorities have steered towards a deflation
policy, attempting to hold down prices for imported commodities such as
oil and iron ore by keeping a lid on oil processing and steelmaking
plants. Higher fossil fuel prices have also worked towards more costly
electricity bills and power blackouts.
