Morning Bites

🔗CISA mills daily crude steel production in late-August fell to 1.885mnt, down 4.1% from the previous ten days, and 3.2% lower YoY. Per CISA data, local production has declined 5.4% YTD (through 31 August). Meanwhile, local steel inventories dropped 11.3% over the period, though remained 8.5% 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, China could potentially introduce additional strict supply-control measures, similar to the 2016-17 reform (when >100mnt steelmaking capacity was removed). Such measures would likely accelerate market rebalancing relative to a scenario of gradual production cuts

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