(Bloomberg) -- China’s major steel industry group is calling for mills to be disciplined in restraining production after government stimulus efforts stoked a rebound in prices of the alloy.
There haven’t been any notable changes in orders for steel products, the China Iron & Steel Association said in a statement late Thursday following a meeting of 18 producers. Any rebound in prices doesn’t reflect a reversal of the longer-term dynamic of oversupply, it said.
China’s massive steel industry is suffering from a demand slump due to ongoing property market weakness and the winding down of a decades-long infrastructure boom. The head of the country’s biggest steelmaker warned in August the situation was worse than crises in 2015 and 2008.
Beijing stepped up efforts to revive economic growth from late September, spurring a sharp rally in steel rebar, a key product, although prices have since given up some of those gains. Steelmaking ingredient iron ore has also advanced, and is about 13% higher than where it was before the stimulus push started.
China’s steel production has topped 1 billion tons in each of the last four years. Output has fallen in the last couple of months from a year earlier, and the association is keen for this trend to continue so as to bring supply and demand back into balance. It predicted the country’s annual output would gradually drop to 800 million tons by 2035.
“We have been wandering around on the mountain top for four years, and it’s not easy to stay there,” Tang Zujun, the vice head of CISA, said in the statement. “We should go down when it’s time.”
Iron ore futures rose 1.9% to $101.15 a ton in Singapore as of 11:53 a.m. local time, and are down 0.5% for the week. Steel rebar contracts climbed 1.3% in Shanghai, while those for hot-rolled coil were up by 1.5%.
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