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What Record Chinese Steel Production Means for AK Steel

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Chinese steel production

Chinese steel production has been strong in 2017, hitting one record after another. The country’s July 2017 steel production hit a fresh monthly record of 74.0 million tons, which was 10.3% higher than the corresponding month last year. July saw China’s 17th consecutive monthly YoY (year-over-year) rise in steel production.

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Impact on US steelmakers

China’s steel overproduction has been a key challenge for U.S. Steel Corporation (X), Nucor (NUE), and AK Steel (AKS). But we should remember that higher steel production in China is not necessarily negative for the global steel industry. Higher exports are what that pressure global steel prices (XME).

Despite production running at record levels, Chinese steel exports have been in check this year. Last month, China exported 7.0 million metric tons of steel products, a YoY fall of 32.4%. July marks the 11th consecutive month that China’s steel exports have registered a double-digit yearly fall. China exported 47.9 million metric tons of steel in the first seven months of 2017, which is 29.0% lower than the corresponding period last year.

Capacity cuts

China is cutting down on its polluting steel units. According to Lakshmi Mittal, ArcelorMittal’s (MT) CEO (chief executive officer), China had 300.0 million metric tons of steel overcapacity, of which it has closed 105.0 million metric tons. He said, “We think that they should shut another 200 million tons that achieves a high level of capacity utilization, so there is still some way to go in achieving those numbers.” However, China plans to curtail only another 45.0 million metric tons of steel overcapacity.

In the next and final part of this series, we’ll look at July global steel production data.

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