The entire ferrous space is buzzing. Tata Steel's results seem to have excited the street but there's an additional trigger that is coming in for the entire ferrous space. It appears that the Chinese steel manufacturers are listening and finally, China's production has started falling in line, particularly in the month of July 2021.

Chinese steel production saw a dip close to 7-1.5 percent, even if you are looking at it on a year-on-year basis, or on a month-on-month basis. It came in at around 87 million tonnes odd. Year to date, China's steel production is still up close to 8.5 percent or at nearly 647 million tonnes.

China's Iron and Steel Association, that is CISA, has said that in 2021 they touted that there will be no growth in China's steel production. That's because of the focus on the environment, as well as on decarbonisation. This would mean that in the remainder of this year, China production will be nearly 52 million tonnes or nearly 11 percent lower on a year-on-year basis. This is the structural change that the analyst community has been waiting for on steel.

Owing to the production cuts, iron prices have been dwindling down. And also, the iron prices are moving down. That's because they're anticipating lower steel production. This could also impact Chinese steel prices negatively. But India's steel makers stand to benefit because of lower Chinese supply into the global markets. Also as India's steel prices are still at a discount of nearly 15 percent in comparison to imported steel. So that explains why all the stocks are doing well.

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Finally, China's production has dipped and now the run rate for the remainder of this year is going to be very difficult for them and there will be lower supply coming out of China, which is good for steel prices on the whole.

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First Published:Aug 16, 2021 5:35 PM IST