In November 2024, China's crude steel production witnessed a significant month-on-month drop of 4.3%, according to official data from the National Bureau of Statistics. The country, which remains the world's largest producer of steel, produced 78.4 million metric tons of crude steel in the month, a sharp decrease from 81.88 million metric tons in October. This decline is largely attributed to tightening steel margins, as well as a seasonal reduction in demand, which is typical during the winter months. The figures reflect a challenging environment for steelmakers, as steel prices faced downward pressure while input costs, particularly iron ore, remained resilient.
The drop in production for November signals a slowdown in China’s steel sector, which has been grappling with several headwinds throughout the year. Analysts pointed out that the squeeze on steel margins has been particularly noticeable, with steel rebar prices declining by 2.1% during November, while iron ore prices rose by 3.1% over the same period. This disparity between steel price declines and iron ore cost increases has put significant pressure on steelmakers.
Further contributing to the downturn in steel output, China's steel consumption has contracted since mid-November, particularly in the northern regions of the country. The cold weather during this period disrupted construction activities, which are typically a major driver of steel demand in winter months. With seasonal demand weakening, especially in construction, steelmakers have had to scale back their production levels to align with the lower consumption. This situation has further compounded the financial difficulties for mills, leading to a decline in overall production during the month.
Despite the November decline, year-on-year production showed a slight increase of 2.5%, indicating that China’s overall steel production remains higher than in November 2023. This uptick is a reflection of the gradual recovery of the Chinese steel industry earlier in the year, which saw increased activity during the spring and summer months. However, with December's output forecasted to fall even further, there are growing concerns about how mills will cope with a weaker market in the final month of the year. Analysts expect a drop in output due to the combination of factors like seasonal maintenance schedules and weaker downstream demand.
Looking at the first 11 months of 2024, total crude steel output in China amounted to 929.19 million metric tons, which represents a 2.7% decline year-on-year. This drop in output reflects the more challenging market conditions in the latter half of the year, as steel demand weakened and production costs remained high. Given the weak demand and increasing operational costs, analysts predict that China’s total crude steel output for 2024 will likely fall by around 2% compared to 2023. The expected decline is in line with ongoing efforts to balance production with market realities, particularly as China’s steel consumption faces ongoing pressure.
Despite these setbacks, some analysts remain hopeful that December's production will be slightly higher compared to December 2023, thanks to a low base effect from the previous year. December 2023 saw a significant drop in output due to a range of factors, including tighter environmental regulations and weaker demand. As such, even with the anticipated month-on-month decline, total output in December 2024 could still show an increase year-on-year.
For China’s steel industry, the overall outlook for 2025 is uncertain. Factors such as global steel demand, the economic performance of key steel-consuming sectors like construction and manufacturing, and fluctuations in raw material costs will continue to influence production decisions. The trend of tight margins, particularly for rebar producers, and seasonal demand patterns will likely continue to shape output levels in the months ahead. Given the rising pressure on mills, many are expected to adopt more cautious approaches to production, potentially lowering output further as they strive to balance profitability with market conditions.
As China’s steel sector navigates the final weeks of 2024, the ongoing challenges of tight margins, weakening consumption, and rising production costs will remain central to the industry's future performance. With analysts predicting a slight decline in total production for the year, the question remains how China's steelmakers will adapt to the evolving market environment in 2025.
