China’s steel and coal output falls as supply pressures and bad weather bite
&imwidth=600&imheight=450&format=webp&quality=medium "China’s steel and coal output falls as supply pressures and bad weather bite")
Steel pipes are seen stacked at an industrial park in Shenyang, Liaoning province, China. Photograph: (Reuters)
In July, China’s steel production declined 4% year-on-year to below 80 million tonnes, the lowest in 2024, amid extreme weather and government capacity control efforts.
China’s steel and coal production fell in July, weighed down by extreme weather disruptions and Beijing’s renewed push to rein in excess capacity, according to Bloomberg. The slowdown comes as deflationary pressures intensify across the world’s second-largest economy. Official data cited by Bloomberg shows steel production dropped 4 per cent year-on-year to under 80 million tonne, the lowest monthly output in 2024 so far and the third straight monthly decline. Although the fall was less steep than in May and June, reduced supply helped improve profit margins for producers.
Over the first seven months of the year, steel output was down 3.1 per cent compared with 2023, marking the weakest level since 2020. Analysts say the industry is grappling with weaker domestic demand, particularly from the struggling property sector, even as exports have risen to absorb some of the surplus. Bloomberg Intelligence estimates China’s excess steel capacity in 2023 at 142 million tonnes — nearly four times the level recorded in 2020.
Coal sector sees rare drop in production
Coal output fell 3.8 per cent year-on-year to just over 380 million tonnes in July — the first such decline in more than a year. Despite this, January-to-July production remained at record levels.
Northern China’s coal hubs were hit hard by torrential rains, which forced mines to shut and disrupted transport links. At the same time, government inspections targeted mines exceeding permitted production limits, adding further pressure on supply.
Thermal coal producers have been shielded from deeper cuts due to surging electricity demand amid summer heatwaves, but coking coal miners, critical suppliers to steelmakers face fewer protections as steel demand remains under strain.
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Policy and environmental pressures ahead
As per Bloomberg, Beijing’s pollution controls ahead of next month’s military parade in the capital are expected to further limit steel output, with much of China’s steel capacity located near Beijing.
While steel exports have helped offset weak domestic consumption, rising global protectionism could limit overseas sales in the coming months. With the property market slump stripping away one of the sector’s key demand pillars, the industry faces a challenging road ahead.
(With inputs from the agencies)