- Mills making losses of about $50 on every ton, company says
- Drop in the country’s crude-steel output is highly probable
Steel output in China is set to tumble, according to commodity trader Noble Group Ltd., which warned that the slump in the top producer will hurt raw-material demand.
Mills are making losses of about $50 on every ton, the Hong Kong-based company said in its earnings statement. Combined with a construction slowdown this quarter, that means a drop in the country’s crude-steel output is highly probable, it said on Thursday.
Steel output in China has dropped this year as local demand contracts for the first time in a generation, with data on Wednesday showing a further fall last month. Mills in China are making increased losses as steel prices retreat to record lows, and a further decline in output would curb consumption of iron ore and coking coal.
“At current steel and raw-materials prices, China’s steel mills are realizing negative margins,” Noble said. “Global crude-steel production ended the third quarter by recording its twelfth consecutive month of year-on-year declines.”
Crude steel output in China was 66.12 million metric tons in October, 3.1 percent lower than the same month last year, according to the statistics bureau. Supply for the first 10 months was 675.1 million tons, 2.2 percent less than the same period in 2014. The country accounts for half global production.
Output may eventually shrink 20 percent, Shanghai Baosteel Group Corp. Chairman Xu Lejiang forecast last month. Jiangsu Shagang Group Chairman Shen Wenrong said that there’s a good chance supply in the country will drop by at least 10 percent within the next decade, according to a report in The Australian newspaper.
Iron ore with 62 percent content delivered to Qingdao fell 1.6 percent to $47.81 a dry ton on Thursday, taking losses this year to 33 percent, according to Metal Bulletin Ltd. Premium hard coking coal shipped from Australia was at $76 a ton this week, also 33 percent lower in 2015, according The Steel Index Ltd.