BEIJING (Reuters) - China’s steel output rose 3.1% in the first two months of 2020 from the same period a year earlier, with much of the increase being pushed into inventories held by mills and traders because of the slump in demand due to the coronavirus outbreak.
Total crude steel output for January and February climbed to 154.7 million tonnes, data from the National Bureau of Statistics (NBS) showed on Monday.
The bureau does not break out figures for January and February separately due to the week-long Lunar New Year holiday, which this year fell in late January before being extended to help stop the spread of the virus.
Average daily output was at 2.58 million tonnes, down from 2.72 million tonnes in December and up slightly from 2.54 million tonnes in the same period a year earlier, according to Reuters calculations. The two-month period was a day longer than in 2019, however, as 2020 is a leap year.
Output gained this year even as manufacturing and construction activity was largely halted from late January as China struggled to stop the spread of the coronavirus, which has killed more than 3,200 in the country.
Steel products inventory - held by mills and traders across the country - have piled up to a record with demand from end-users curtailed.
Some mills, though, have faced production difficulties as restricted transport hindered raw materials shipments.
The China Iron and Steel Association (CISA) has repeatedly called for steelmakers to adjust production plans in accordance with market demand and to ensure ample cash flow.
Many electric arc furnaces suspended production in February, while blast furnaces - which cost more to halt and restart - remained in production.
Tang Binghua, an analyst with Founder CIFCO Futures said before the data was released that mills were not likely to cut output significantly further as they’re still profitable and demand is expected to recover in April.
“It’s not that there’s no demand, it is just being postponed,” said Tang.
The most active May contract for construction rebar on the Shanghai Futures Exchange had gained 7.7% since Feb. 3, the first trading day after holidays, while the forward October contract rose 8.6%.
Reporting by Min Zhang and Tom Daly; Editing by Stephen Coates and Tom Hogue