China's power supply shortages have escalated during the summer, and some Chinese steel producers have been forced to cut production again in July after facing small-scale power cuts at the end of May, Kallanish notes.

Amid tight power supply and production control, Yunnan Province has decided to restrict production at seven steel producers. The production restriction ratio is about 30-40%, which is expected to affect construction steel output of about 15,700 tonnes/day.

Steelmakers in Hunan Province have also been booking equipment overhauls to avoid power restrictions there. A steel mill in Loudi city has been overhauling a rebar production line since last week, thereby reducing the production of rebar by about 2,200 t/d. Other steel mills in Hunan are also ready to cut production. The planned steel output of mills in Hunan in July is approximately 1.745 million tonnes, a decrease of 4.1% from June.

Steel mills in Henan have also successively received notices of production restrictions and have reduced their production significantly. Local construction steel rolling lines are mostly fully stopped, and the average capacity utilisation rate has dropped to about 22.85%. Current production restrictions are expected to affect 46,800 t/d of construction steel output.

Tight supply of inputs for power generation cannot be eased for the time being. The Henan Provincial Development and Reform Commission requires coal for power generation not to be sold outside the province to ensure local power supply. Non-ferrous metal producers in Yunnan, Inner Mongolia and Ningxia provinces have also received notices to reduce electricity consumption by 25-30%.

The decline in steel prices and in steel mill profits has meanwhile also reduced the enthusiasm of steel mills to maximise production, thereby reducing steel output in July.