Morning Bites

🔗CISA mills daily crude steel production in mid-September inched down to 1.922mnt, -0.1% vs. the previous ten days, and 7.3% lower YoY. The CISA data show that local production declined 5.6% YTD (through 20 September). Meanwhile, local steel inventories increased 3.4% over the period, being 11.7% higher YoY

Given the ongoing weakness in the global steel market, we believe that Beijing will continue gradually tightening 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) to accelerate market rebalancing, we believe

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