China’s steel industry cut output for a second successive month in July, helping in part explain the shock weakening in industrial output across the entire economy last month.
The weak industrial production figure for July will add to the downward pressure on iron ore prices that saw the global spot price dip under $US90 a tonne for the first time in months on Tuesday (see separate story).
The 4.8% rise in China’s industrial production last month was the slowest rate of growth since February 2002 and took markets and analysts by surprise.
China’s monthly crude steel output fell for a second straight month in July, as steel mills cut back on output amid heightened environmental measures and the surge in iron ore prices to 6-year highs around $US125 a tonne
China produced 85.22 million tonnes of crude steel last month, data from the National Bureau of Statistics (NBS) revealed, down from 87.53 million tonnes in June but still well above 81.24 million tonnes a year earlier.
China’s crude steel production hit an all-time high in May of 89.1 million tonnes, so the July output figure represents a fall of 4% in two months.
That fall provides some backing for the recent sharp fall in iron ore prices.
The Metal Bulletin Fastmarkets price fell to $US89.25 a tonne for 62% Fe iron delivered to northern China on Tuesday.
China’s iron ore imports in July reached 90.9 million tonnes, up from a 40-month-low of 75.08 million tonnes in June and 1.2% higher than 89.3 million tonnes in July 2018.
Over the first seven months of 2019, China imported 590.08 million tonnes of iron ore, down 4.9% from the same period last year.
China’s July iron ore imports were back near the 91.26 million tonnes in January. Iron ore prices are now down nearly 30% from the peak of just over $US125 a tonne reached on July 2.
The high levels of imports shows that the mills are now restocking as more production emerges from Brazil as Vale brings more capacity back online in the wake of the shutdowns after the January 25 dam wall collapse and flood that left close to 300 people dead or missing.
In the first seven months, China produced out 577.06 million tonnes of steel, up 9% from the same period last year, the NBS data showed.