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China’s steel mill owners are in a bad mood as demand takes a hit

China’s steel mill owners are in a bad mood as demand takes a hit

Steel mill owners in parts of China are in a bad mood, Beijing-based commodities consultant Simon Wu said.

Steel inventories are slowly piling up in the warehouses of the country’s biggest steelmaking hub, the northeastern city of Tangshan, as well as in the provinces of Jiangsu and Shandong, mill owners told Wu, a senior consultant with analyst Wood Mackenzie.

Demand for steel is falling amid pandemic lockdowns and crippled construction activity, they said.

“There’s negative energy all round. The steel industry is just not making any profit,” Wu said. 

A lot of steel — a key raw material in the manufacturing powerhouse — is sitting idle around the country amid a stop-and-start economy which is forcing down demand and prices.

Prices of both steel and its main ingredient iron ore were volatile during the Shanghai lockdown but headed on a downward trajectory earlier this month.

Weak demand for steel, a bellwether of China’s economy, also reflected the country’s broader slowdown, though recent data pointed to some improvement as industrial production rose slightly by 0.7% in May from a year ago.

Crucially, China’s steelmaking industry — the biggest in the world — hosts extensive supply chains that stretch from Chinese blast furnaces to overseas iron ore mines in Australia and Brazil, the biggest suppliers of iron ore to China.

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Because of that, any jitters within China can unravel an extensive network of supply chains, potentially heaping further pressures on existing global disruptions. 

A worker cutting steel pipes near a coal-powered power station in Zhangjiakou, China, on Nov. 12, 2021. The country’s biggest consumers of steel and its economic growth engines — such as property construction and infrastructure development — have gone quiet, according to one…

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