Mon Aug 29, 2011
* Mid-Aug output marks second increase in a row
* Demand expected to pick up in Sept-Oct
* Market concerned over impact of tightening moves
By Ruby Lian and David Stanway
SHANGHAI, Aug 29 (Reuters) - China's daily crude steel output stood at 1.947 million tonnes over Aug. 11-20, up 0.26 percent from the previous 10 days, industry data showed on Monday, with mills planning to take advantage of a revival in demand in the autumn.
Daily output in the world's biggest steel producer and consumer rose for the second ten-day period in a row, according to data from the China Iron and Steel Association (CISA).
Market players expect demand to pick up in September and October, keeping steel production at high levels.
"China's overall investment in construction projects has remained aggressive this year, the driver behind steel production," said Bill Chen, a senior trader with Hong Kong-based Smart Timing Steel Ltd.
Mills aimed to cash in on the building programme even during the sweltering summer, when construction normally slows, with daily output remaining close to the record of more than 2
million tonnes set in the last 10 days of June.
Daily steel output has stayed above 1.9 million tonnes since February, up from an average of about 1.7 million tonnes last year.
"The next two months are normally the last opportunity for large sales for steel mills as demand traditionally picks up and pushes prices higher," said an official with major steelmaker
Anshan Iron & Steel Group Corp .
Chinese major steel mills have all raised main product prices for September bookings.
H2 UNCERTAINTIES
China's tightening moves may further weigh on steel prices in the months ahead, with the world's second-largest economy ordering banks to include margin deposits in required reserves
at the central bank, after repeatedly raising RRR and interest rates since late-2010.
"The PBOC's latest move to expand the RRR base demonstrates the government's intention of remaining on a tightening track," said Henry Liu, regional head of commodity research at Mirae
Asset Securities in Hong Kong.
He said in a note that steel traders were already suffering from the credit crunch, while demand growth was dependent on a single factor -- construction activities. "Without the participation of traders, we see little chance of steel price improvement," he added.
Some of China's biggest steel mills, which mainly produce flat steel products, have suffered from weak demand from key customers such as the auto sector, and their profits have been further eroded by persistently high costs.
"Steel production costs have been high, but I am worried about steel prices after October and even next year because the uncertain economic outlook still weighs on demand," the mill
official said.
The following table shows changes in daily output since the beginning of the year.
Period Daily Change
output (pct)
(mln T)
Aug 11-20 1.947 +0.3
Aug 1-10 1.942 +0.4
July 21-31 1.935 -0.7
July 11-20 1.950 -0.3
July 1-10 1.955 -3.1
Jun 21-30 2.018 +3.2
Jun 11-20 1.955 -0.6
Jun 1-10 1.967 +2.7
May 21-31 1.915 +3.5
May 11-20 1.984 +1.9
May 1-10 1.947 +0.3
Apr 21-30 1.941 +1.9
Apr 11-20 1.904 -1.1
Apr 1-10 1.933 +0.6
Mar 21-31 1.922 -1.2
Mar 11-20 1.945 +2.2
Mar 1-10 1.903 -0.4
Feb 21-28 1.912 +5.4
Feb 11-20 1.814 +1.5
Feb 1-10 1.787 +4.5
Jan 21-31 1.710 +0.9
Jan 11-20 1.695 -5.5
Jan 1-10 1.794 +3.5
Source CISA
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