China steel records tumble as revamped industry enjoys boom

China churned out a record volume of steel in the first half as mills pushed furnaces hard to benefit from healthy margins and growing demand from sectors including property, shipbuilding and machinery.

The world’s top steelmaker produced 451mn metric tonnes, up 6% from a year earlier, according to the National Bureau of Statistics on Monday. In June alone, output climbed 7.5% on the year to 80.2mn tonnes – also an all-time high when calculated in terms of tons a day.

The rude health of China’s steel industry is underscored by inventories of the alloy sliding further in recent months, as well as by data showing mills enjoying high profits.

Angang Steel Co, the country’s fourth-biggest steelmaker, likely near-doubled its net income in the first half amid an overall recovery in the market due to supply-side reforms, the company said July 12.

Still, the first-half could prove a high-water mark as Chinese growth moderates and a trade war with the US threatens.

Steel demand will soften in the second half to grow 3% for the year, versus 5% in the period through June, Citigroup Inc analysts wrote in an emailed note.

“In the short term, sentiment is going to be volatile because of the US-China trade tensions and RMB depreciation and there’s certainly some people who are quite bearish on the second half,” Kevin Bai, analyst at consultancy CRU Group, said from Beijing.

“But currently speaking, mills are still enjoying quite healthy margins, so it may not impact too much on steel,” he said, noting additional environmental controls and mill maintenance.

China’s steel industry has been revamped since 2016 by a government-led restructuring that shut down a swathe of smaller and sometimes illegal plants, while boosting the fortunes of bigger, often stateowned steelmakers.

Those changes, together with tougher environmental controls and a recovery in the economy, have helped reboot the global steel industry by raising prices and cutting China’s exports. Outbound shipments from China to the rest of the world slumped to the lowest since 2013 in the first half.

There’s a statistical caveat to the big year- on-year increases in China’s steel output in 2018, with many analysts suggesting much of the reported addition is down to more being counted, rather than more actual production.

Output of primary aluminium also rose, adding 0.8% in June from a year earlier to 2.83mn tonnes, according to the statistics bureau. Firsthalf production grew 1.6% to 16.47mn tonnes.