Record high steel production in China and worldwide

Besides the speculative element, what else had driven iron ore prices up? First and foremost, Chinese steel production reached a record high of 97.85 million tons (3.26 million tons per day) in April, according to data from the National Bureau of Statistics. It has been rising uninterruptedly (year-on-year) since the Corona-related slump in the first quarter of last year. In the first four months of this year, China has already produced around 375 million tons of steel. The country is thus on track to significantly exceed last year's record level of 1.05 billion tons. The Chinese authorities had actually set the 1 billion ton mark as the maximum for the steel industry, not least to cap or reduce CO2 emissions.

However, the very high steel prices have given manufacturers an incentive to expand their production. As a result, production cutbacks ordered for environmental reasons in some regions of China have recently been more than offset by production increases in other regions. The price of rebar on the SHFE in Shanghai had risen to a record high of CNY 6,200 per ton (equivalent to around USD 965 per ton) in mid-May. In line with iron ore prices, it had subsequently slumped (Chart 2). Thanks to record Chinese steel production, a record amount of steel was also produced at global level in the first four months of the year (just under 652 million tons according to data from the World Steel Association).

Source: Commerzbank Research, Photo: Fotolia