Power restrictions by local governments in China, the biggest steelmaking nation, may lead to the suspension of 25 million metric tons of annual steel capacity, helping boost prices, Credit Suisse Group AG said.
Disruption to steel production has started as local governments rush to meet year-end power efficiency targets, Trina Chen, a Credit Suisse analyst, said today in a note. The suspended capacity includes a Baosteel Group Corp. blast furnace in Ningbo, she said.
Slowing demand has led about 40 percent of steelmakers in the country to idle plants or put them on maintenance, the China Iron and Steel Association said Aug. 3. China’s steel output dropped by 3.9 percent to 51.7 million tons in July from a month ago, posting a five-month low.
The production cuts “should have positive impact on the fourth-quarter steel prices, as it combines with the industry production cut in July-August,” Chen said in the report.
Steel prices in China gained 1 percent this week to 4,217 yuan ($619) a ton yesterday. Prices fell 1.9 percent last week, the first drop in six, amid concerns slowing economic growth may curb demand, according to the researcher Beijing Antaike Information Development Co.
Production cuts at steelmakers may hurt demand for iron ore, curbing prices. The 62 percent-iron ore arriving at China’s Tianjing Port has dropped 0.8 percent this week to $141.8 a ton yesterday, according to the Steel Index.
Baosteel’s Ningbo unit will shut a 2 million ton-a-year furnace for more than three months from Sept. 1 as the city government aims to achieve its energy-saving target, Ningbo Radio reported on its website, citing Huang Ming, deputy head of operation planning at the unit. The plant would lose 180,000 tons of output a month, Huang was cited as saying.
