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Dips in Chinese Production Just a Drop in the Global Steel Bucket

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China’s steel production

In the previous parts of this series, we discussed how steel demand is shaping up in China. In this part, we’ll discuss how steel production is shaping up. Chinese steel production declined by 0.6% in May YoY (year-over-year). Steel production also declined by 0.7% YoY in April.

The chart above shows the trend in China’s steel production. According to the National Bureau of Statistics of China, the country produced 69.95 million tonnes of steel in May.

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Consumption slowdown

This year, the World Steel Association expects Chinese steel consumption to decline by 0.5% YoY. The forecast seems quite optimistic considering the current state of the Chinese steel industry.

China Iron & Steel Association has provided a much more realistic estimate of Chinese steel demand. It expects steel consumption to drop by 6% YoY this year. And though Chinese steel production has also declined in the first five months of the current year, the decline isn’t enough to stop an increase in Chinese steel exports.

Higher exports

China has been producing steel in excess of its domestic demand for several years. Steel exports from China have reached record highs as a result of this overproduction. No wonder, steel companies U.S. Steel Corporation (X) and AK Steel (AKS) have filed antidumping charges against Chinese steel imports.

Having said that, global miners including Rio Tinto (RIO) and BHP Billiton (BHP) benefit from higher Chinese steel production. These companies supply iron ore to Chinese (FXI) steel companies.

How much steel did China export in May? We’ll find out in our next part.

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