Vietnam's leading steelmaker Formosa Ha Tinh (FHS) has decided to cut production as the current market sentiment has deteriorated to the point where the company had to cut production for the first time since its founding. In 2018, the steel company commissioned a second blast furnace with an annual capacity of 7 million tons.
Hoa Phat June sales decreased by 14% compared to the same period of the previous year and decreased to 560 thousand tons. In addition, Hoa Phat has decided to entrust the upgrade of Primetals Technologies facility to Mitsubishi Heavy Industries to expand the steel grades that can be produced with the “QSP” thin slab continuous casting system offered by Danieli (Italy). This expansion alone will not be an emergency measure, so production cuts will become inevitable for Hoa Phat as well.
In addition to the above, rising interest rates in Vietnam have slowed down domestic real estate demand and the burden on steelmakers in terms of financing has increased, resulting in further reductions in production.
Chinese
China's anti-COVID-19 policy, seasonal recession in the summer and heavy rains across the country, and rising interest rates have seen purchasing rates fall even as steel prices fall globally. Therefore, steel production is likely to remain under pressure until autumn demand arrives.
Steel production in China has been on the rise since the Chinese New Year. However, steel production started to decline in June. At the beginning of July, the daily crude steel production of China Metallurgical and Steel Association (CISA) member companies was 2.074 million tons, about 25 thousand tons less than at the end of June.
Production is expected to continue to decline beyond July, as the government's policy is that crude steel production should not exceed the level reached in 2021.
India
Demand for domestic steel decreases during the rainy season in India, causing a slowdown in construction. In addition, the government imposed a 15% export tax on various steel products, resulting in a reduction in steelmaking capacity utilization.
Indian steel giant JSW Steel reported that its crude steel output fell 3 percent from 5.88 million tons to 5.72 million tons. Production fell as some planned shutdowns were premature due to low demand. On an annual basis, steel production increased by 16% compared to 4.94 million tons in the first quarter of 2022.
Tata Steel's steel sales fell 21% to 4.06 Mt. On an annual basis, production increased by 6% from 4.63 million tons in the first quarter of fiscal 2022. Sales fell 2% year-on-year due to the imposition of a 15% export tax.
Steel stocks remain high around the world due to disruption in the supply chain in the automotive and other manufacturing industries and the impact of higher rates on real estate. Even in the US, where steel prices tend to be the highest in the world, hot rolled coil prices fell below $1,000/ton for the first time in nearly a year and a half.
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