SHANGHAI • China’s steel industry notched another production record in the first quarter (1Q), spurred by consumption in the infrastructure sector as government stimulus props up demand.
The maker of half the world’s steel churned out 231 million tonnes between January and March, up almost 10% from a year earlier and the highest for any 1Q on record. Production in March climbed 10% to 80.3 million tonnes, according to data from the statistics bureau.
Output is rebounding with steel prices as China’s economy holds up, with pro-growth policies helping to arrest a slowdown that had weighed on materials demand since the middle of 2018. Spot prices for rebar climbed this week to their highest since November, boosting producer margins and spurring higher output.
“It’s an extremely strong steel output number,” Tomas Gutierrez, an analyst at consultancy Kallanish Commodities Ltd, said by phone from Shanghai.
“There is the expectation that local governments will have more money to spend on new projects, and that seems to be speeding up demand. There is a growing reliance on state spending to support growth.”
China’s economy grew at 6.4% in the 1Q, beating estimates and fuelling the debate over whether the economy needs further stimulus measures.
The demand environment for metals is improving, Citigroup Inc said earlier this week, with gauges such as new credit and manufacturing activity signalling a “bullish turn” in Chinese growth sentiment and activity.
There are caveats on the steel numbers. Kallanish noted that steel purchasing is peaking earlier than normal, and is probably lower than last year due to an earlier Spring Festival.
The country’s steel use will expand 1% over 2019, compared to an earlier estimate of flat growth, before declining next year, the World Steel Association said in its twice yearly outlook on Tuesday.
Busier activity at China’s steel mills coincides with serious disruptions in iron-ore supply that’s sent benchmark spot prices surging more than 30% this year.
While Vale SA said a major shuttered mine is set to reopen imminently, the miner didn’t change its lowered sales guidance for 2019. Rivals BHP Group Ltd and Rio Tinto Group have also trimmed annual production guidance after bad weather and operational issues.
China’s steel production will rise 1.8% this year to a record, with rising prices extending into the 3Q on better demand, according to Shanghai Steelhome Information Technology Co Ltd. — Bloomberg