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Wednesday, 18 June 14
CHINESE STEEL PRODUCTION SETS RECORD DURING FIRST TEN DAYS OF JUNE - COMMODORE RESEARCH & CONSULTANCY

Recently released data shows that average daily crude steel production at China's key steel mills hit a record high of 1.833 million tons during the first ten days of this month.  Previously, daily crude steel production at China's key steel mills during the last eleven days of May averaged 1.767 million tons - which was a high level, although down from the previous record of 1.824 million tons seen during the first ten days of May.  It is very encouraging that Chinese steel production has set another record this month.

As we have continued to stress, Chinese steel production has remained very strong during the last several months.  While Chinese steel production normally comes under a small amount of pressure in June (while still remaining at robust levels), it is very encouraging and not surprising that production has set a record this month.  As we have been discussing in our Weekly Dry Bulk Reports and Weekly China Reports, demand for steel in China has remained firm as the government continues to green light new infrastructure projects and works towards further stimulating the economy.  In addition, low iron ore prices have allowed profit margins at Chinese steel mills to improve significantly since the start of this year.  Global demand for Chinese steel exports has also remained robust, even as global steel production has also set a new record this year.

Record steel production means record iron ore consumption.  Overall, Chinese iron ore consumption has remained robust this year and Chinese iron ore imports have continued to surge.  Chinese steel mills continue to purchase a record amount of iron ore imports this year, with Chinese iron ore imports this year up by approximately 20% from last year's record level.  Going forward, Australian and Brazilian iron ore production is set to surge even further and steel mills will continue to happily purchase low-priced high quality iron ore from Australia and Brazil.  At the same time, more Chinese domestic iron ore mines will likely suspend iron ore production as they can't compete with Australian and Brazilian mines with much lower costs.  Seaborne iron ore trade is poised to remain robust.
Source: Commodore Research & Consultancy



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