Iron ore futures continued to rally on tight supply and better steel demand, amid production restriction.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE), then hiked up by 1.95% day-on-day or RMB 22.50 to RMB 1,174.50/mt on Thursday.
The steel rebar contract on the Shanghai Futures Exchange also rose slightly by 0.10% or RMB 5 day-on-day to RMB 4,849/mt.
More steel production cuts in H2 2021 to cut carbon emissions
In view of China’s Two Sessions meeting, Platts expected the Beijing policymakers to implement more steel output cuts during the second half of 2021 to fulfill environmental obligations.
Besides reducing steel output, China may increase its scrap utilization for steelmaking, and Platts estimated China’s net electric arc furnace (EAF) capacity to expand around 13.3 million mt per year for a total of 196 million mt per year by end of 2021.
More merger and acquisition activities may occur in the Chinese steel sectors, as large mills extend their market shares from 2021 onwards for industry consolidation.
Tangshan to close seven blast furnaces in March
China’s steelmaking hub, Tangshan had scheduled the closure of 7 blast furnaces at pig iron making capacity of 3.85 million mt per year in March.
The shutdown had complied with Chinese authority’s initiative to improve air quality in the region. However, the output shortfall was considered negligible as more blast furnaces are slated for commissions from March onwards.
According to Platts, the China’s overall pig iron capacity is estimated to increase around 11 million mt per year, or 30,000 mt per day, during the first half of 2021, due to the commissioning of new blast furnaces across provinces.
Therefore, China’s total pig iron capacity is expected to reach around 1.042 billion mt per year by mid-2021, and further increase by around 6 million mt per year during the second half of the 2021.