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China steel output set to fall in ’12; cuts prompt cancellations

Keywords: Tags  Chinese steel output, Cisa, iron ore contract shipments, steel mill production, output cuts, iron ore prices

SHANGHAI, China — China’s crude steel production could fall this year for the first time in 31 years, a senior industry analyst said in a report that was picked up by the China Iron and Steel Association (Cisa).

Second-half crude steel output could fall 10 percent to 321.5 million tonnes from 357.2 million tonnes in the first half, steel industry consultant Xue Heping said in the report, putting full-year output at some 678.7 million tonnes, down 0.7 percent from last year.

Cisa couldn’t be reached for comment Tuesday.

Chinese steel production cuts have led mills to cancel contracted iron ore shipments, which could further pressure spot iron ore prices.

Mills reportedly canceled shipments after a slump in China’s steel market led them to bring forward planned maintenance outages.

Iron ore prices have already fallen to a two-and-a-half-year low and could come under further pressure if contracted material makes its way onto the spot market.

"A steel mill said (Monday) that it will defer one contracted cargo from Rio Tinto this month," one trader told AMM sister publication Metal Bulletin.

China’s steel industry registered a profit of 2.39 billion yuan ($377 million) in the first half, plunging 95.8 percent from the same period last year, according to Cisa.

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