Morning Bites

🔗CISA mills daily crude steel production in mid-July was 2.015mnt, down 0.3% from the previous ten days, and 5.9% lower YoY. Per CISA data, local production has declined 5.4% YTD (through 20 July). Meanwhile, local steel inventories expanded 8.1% over the period and were also 15.8% higher YoY

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

For instance, Beijing has recently imposed 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