China's crude steel output fell 1.7 percent in May from a year earlier, government data showed on Thursday, as a sluggish economy and property market hit demand.

Steel production reached 69.95 million tonnes last month, bringing output in January-May to 340.17 million tonnes, down 1.6 percent from the same period last year, according to data from the National Statistical Bureau.

Average daily crude steel output in May came in at 2.256 million tonnes, down from 2.297 million tonnes in April, according to Reuters calculations based on the data.

Steel mills ramped up production the month before in anticipation of a seasonal pickup in demand, but a rebound in iron ore prices, soft steel demand and a deepening glut have prompted mills to reduce output.

"Steel mills have started to curb production since late May as a result of declining profit. And this trend will last in June as steel demand is shrinking, but iron ore remains in an upward trend," said Xia Junyan an analyst with Everbright Futures in Shanghai.

Demand for steel in the world's biggest producer and consumer of the building material has been hit by chronic overcapacity and and economy that is losing momentum.

The country's steel consumption continued to shrink in the first quarter of this year after falling in 2014 for the first time in more than three decades.

That has forced Chinese producers to boost steel exports, with shipments rising to 9.2 million tonnes in May, a four-month high.

While iron ore prices have rebounded nearly 40 percent from a 10-year low below $50 a tonne .IO62-CNI=SI in April amid declining stocks of the raw material at Chinese ports, Shanghai rebar steel futures have risen only 4 percent from their April trough.

 

reuters.com

Report Abuse