China has proven once again that it has a global impact on the steel market. The recent surge in steel prices in China had a knock on effect on every corner of the world, including markets where demand fundamentals did not justify a price increase. In the past few years, the Chinese central government has been trying to reduce steel production and pollution levels by shutting down the most polluting mills. However, the local provinces started financing their local steel makers to improve production by replacing old machinery with new and more efficient equipment. Hence, for every mill closed down, another mill increased productivity levels and the net result was the opposite of the original aim.
In fact, in the first seven months of 2017, Chinese crude steel production rose by 5.1%, compared to the same period in 2016. With winter approaching (when pollution levels gets worse), the central government announced at the end of July its intent to impose production cuts. Distributors and traders rushed to buy more steel, anticipating a shortage in supply, which caused prices to surge.
This text is excerpts from our August issue of Global Steel Sheet Products Market report. To find out more about our service please click here