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The production reduction has a certain boost to the long-term trend of the steel market

April 26,2023

With the recent production reduction news has been constantly exposed, this is expected to become the core factor of steel price evolution in the later stage. However, in the short term, the "wind" of production reduction is very difficult to disperse the current haze in the steel  market.

This is mainly due to the current enthusiasm and lack of initiative of steel enterprises to reduce production.


Steel prices continued to decline in the past March, but hot metal production remained high, a trend that continued in April. Data show that in the first ten days of April, steel enterprises produced a total of 23.2196 million tons of crude steel and 20.4287 million tons of pig iron. Of these, the average daily output of crude steel reached 2.322 million tons, an increase of 2.71 percent over the previous month; and the average daily output of pig iron reached 2.0429 million tons, an increase of 1.85 percent over the previous month. This shows that the current steel enterprises take the initiative to reduce production scale and intensity are limited, it is difficult for steel prices to repair the rebound to provide support.

Considering that the output adjustment often lags behind the change of demand, in the medium to long term, if the scale of production reduction expands and the market has a window period of mismatch between supply and demand, the possibility of a periodic rebound in steel prices cannot be ruled out. Therefore, the production reduction still has a certain boost to the long-term trend of the steel market. However, large-scale production cuts by steelmakers will also trigger a decline in raw fuel prices. This may also lead to the downward movement of the steel cost center, which in turn leads to a reduction in its support for steel prices.

Overall, steel prices in the short term will still be in the shock adjustment stage, temporarily do not have the conditions to achieve directional breakthroughs. Market participants should focus on the evolution of market sentiment, the effect of demand release.

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