Morning Bites

🔗CISA mills daily crude steel production in late-June was 2.02mnt, down 3.6% from the previous ten days and 4.9% lower YoY. Per CISA data, local production has declined 5.5% YTD (through 30 June). Meanwhile, local steel inventories decreased 9.1% over the period, but were still 5.4% higher YoY

Given the ongoing weakness in the global steel market, we believe that Beijing will continue to tighten supply gradually. Although the current five-year plan lacks explicit targets for capacity cuts, China might also introduce additional strict supply-control measures, similar to the 2016-17 reform (when >100mnt steelmaking capacity was removed)

For instance, China has recently released a more stringent steel capacity swap plan to curb oversupply. Per a Ministry of Industry and Information Technology statement, at least 1.5t of old steel capacity must now be decommissioned to build ⁠every 1.0t of new capacity nationwide

#steel