Chinese steelmakers are struggling with falling prices, with mills having to react quickly to a post-holiday demand trough in China.

Earlier this week, Yunnan steel producers announced equipment maintenances to reduce construction steel production by 300,000 tonnes in October due to strong coal prices and weak steel prices (see Kallanish passim). Yunnan Xianfu Steel's one 1,350 cubic-meter blast furnace and two 630 c-m blast furnaces have been suspended for five days starting from 9 October.

On Wednesday, market sources revealed that Yunnan steel mills are requiring traders to make advance payments before shipping, instead of directly shipping and paying on receipt as before. Although these traders still retain the benefits of discounted prices, this shows that steel mills have no confidence in the current market, Kallanish notes.

Hubei steel mills also announced this week that they would suspend shipments of construction steel to avoid further losses. Baowu Echeng Steel, Wuhan Steel and Jinshenglan Steel jointly issued a notice stating that they will limit the sales price and quantity of steel starting from 10 October.

Later in the week, Jinshenglan announced it would cut 5,000 tonnes of billet production over 8-31 October due to a converter overhaul. It also conducted a 4-day suspension of a construction steel rolling mill this week.

Chinese steel mills seem to prefer boosting market confidence through non-production restrictions, but these measures in fact have limited impact. More and more steel mills will have to temporarily reduce production to avoid expanding losses.

Starting from the end of September, Shanxi-based Lvliang Jianlong, Jinnan Steel, and Taihang Steel announced blast furnace production restrictions. Subsequently, more Shanxi steel mills have joined the production cuts in October. Some leading steel giants such as Shougang Jingtang and Baosteel have also announced blast furnace and rolling mill overhauls starting this week to ease supply pressure on the market.