Chinese Steel Mills Cut Production Amid Supply Glut And Low Profitability

Several Chinese steel mills have initiated production cuts due to a supply glut and low profitability, according to a report from consultancy Mysteel. The move, which began on Monday, sees four steelmakers in Xinjiang reducing output by 10%.

These cuts, while notable, are not expected to significantly impact the broader market. Xinjiang’s steel production accounted for only 1.3% of China’s national output last year, as reported by the National Bureau of Statistics.

Mysteel estimated that the reduction will amount to roughly 2,000 tons of daily output in a nation that produces nearly 3 million tons of steel per day. The production cuts come shortly after a commitment by the Chinese government to curb steel production, discussed at its annual legislative meetings earlier this month, as part of efforts to address the industry’s ongoing overproduction crisis.

According to Mysteel, the reductions are primarily aimed at boosting sentiment within the sector. The affected companies include Xinjiang Ba Yi Iron and Steel Co., a subsidiary of the world’s largest steel producer, China Baowu Steel Group, as well as Xinjiang Kunlun Steel Co., Xinjiang Minxin Iron Steel Group Co., and Xinjiang Kunyu Iron & Steel Co.

Following the announcement, shares of Ba Yi surged by 7.5% in Shanghai, although they later retraced those gains. In response to the reduced demand for steel, iron ore futures in Singapore dropped 0.9%, reaching $101.45 per ton.