Recently, there has been continuous news about the reduction of crude steel output. Jiangsu, Anhui, Gansu and other provinces have successively put forward the reduction target of crude steel output, and some steel enterprises have begun to implement the production reduction plan. The author believes that from the current trend, there are the following possibilities for crude steel output reduction in the second half of the year:

First, national ministries and commissions clearly stated that the probability of reducing the specific target of national crude steel production is small. In the first half of the year, the two ministries and commissions put forward the target of reducing crude steel production in 2021, which added a stronger expected driving force to the upward steel market driven by factors such as cost, inflation and demand. The author expects that in the later stage, the state ministries and commissions will be relatively cautious and gentle in their statements on the target of reducing crude steel output, so as not to cause great fluctuations in the market.

Second, the reduction work of all provinces and steel enterprises will be carried out in an all-round way, and the reduction efforts will be relatively equal. At present, no more than 10 provinces have proposed reduction targets. Among the 28 provinces (autonomous regions and municipalities directly under the central government) counted, only Tianjin had no year-on-year increase in crude steel production in the first five months of this year, which shows that the reduction task in the second half of this year is quite arduous.

Third, supporting policies for pressure reduction will be launched one after another. The author believes that around the reduction goal, the state will introduce higher implementation standards in environmental protection and energy consumption, especially in autumn and winter air pollution control, and the requirements for the iron and steel industry will be more strict. In addition, in order to ensure sufficient market supply under the target of reducing output, the export tax rebate of some steel varieties may be canceled. At the same time, the collection of tariffs on other steel varieties will also be the trend.

According to the statistics of the Steel Association, in early July, the average daily crude steel output of China's key steel enterprises reached 2138000 tons, a new low since the beginning of this year, and increased to 2194000 tons by mid July. With the continuous expansion of the reduction range, the crude steel output will continue to shrink. The author believes that although the task of reducing production in the second half of the year is arduous, the goal of reducing production is expected to be achieved with the joint efforts of all provinces and steel enterprises.

The premise of reducing production is to adapt to demand

At present, all parties in the market do not have the same understanding of reducing crude steel output, which promotes the fluctuation of steel price trend to a certain extent. As the pattern that more than 80% of China's iron ore depends on imports is difficult to completely change in the short term, this determines that the production will be greatly reduced in the case of demand, which is difficult to effectively lower the iron ore price, and may even stimulate the rise of steel price, which is not conducive to the stability of the market and industrial chain supply chain.

The author believes that judging whether the steel output is reasonable should be considered from the aspects of demand, import and export, steel inventory and so on. Cannot do without novel coronavirus pneumonia, which is a new trend of downstream industry. Downstream demand is more vigorous. The author believes that it is reasonable to appropriately increase output under the condition of demand growth. Only by maintaining the balance between supply and demand can the steel price stabilize. Under the premise of stable and healthy development of national economy, how to balance market supply and demand and ensure the adaptation of output and demand is the premise of reducing crude steel output.