China’s Steel Mills Lead Steep Drop in Building Materials Output

Bundles of steel tubes at a trading market in the outskirts of Shanghai, China. Photographer: Qilai Shen/Bloomberg Photo by Qilai Shen /Bloomberg

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(Bloomberg) — China made further headway in June in its bid to tackle oversupply of key industrial commodities, with crude steel production leading declines in construction materials with its biggest drop in 10 months.

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Output in June fell 9.2% year-on-year to 83.2 million tons, leaving first-half production at its weakest since 2020 and 3% off last year’s pace, according to the statistics bureau on Tuesday. Cement output, meanwhile, fell 5.3% while glass-making dropped 4.5%.

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China’s steel sector, the world’s largest, has been in Beijing’s crosshairs since March, as the country’s yearslong property crash saps demand. The effort to rein-in excess supply across industries has taken on greater prominence in recent weeks. Government officials have inveighed against overcapacity and cutthroat pricing, which have pushed the country’s run of factory deflation well into its third year and ramped up friction with trading partners.

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The country’s aluminum smelters bucked the trend, lifting output to a daily record in June due to improved margins as lower input costs offset slack demand.

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Production rose 3.4% to hit a run-rate of 127,000 tons a day. The world’s top producer has added substantial new capacity in recent years, but the industry is now nearing its government-imposed cap.

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On the Wire

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China’s economic growth exceeded expectations in the second quarter, but strong exports to markets outside the US masked deepening pressure caused by weak consumer demand at home.

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China’s home prices fell at a faster pace in June, underscoring growing speculation for additional measures to revive the property market.

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China’s push to stockpile crude will help offset softer commercial demand and keep imports “robust,” according to Energy Aspects.

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Chinese miner CMOC Group Ltd. produced more cobalt at its two projects in the Democratic Republic of Congo in the first half, despite the African nation’s ban on exports.

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China’s efforts to ensure power supply through punishing summer heat are getting a boost from a government trade-in program that’s allowed millions of households to upgrade to more efficient air-conditioners. 

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China’s surging power generation from solar and wind is reducing the demand for coal and natural gas, according to Bloomberg Intelligence. Above average rainfall since May signals stronger hydropower production in the coming months, which could cut fossil fuel demand further.

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This Week’s Diary

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Tuesday, July 15

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