(Yicai) April 30 -- China will continue to adjust and optimize its steel production limits in 2024 as prices plunge amid a supply glut, the deputy secretary-general of the China Iron and Steel Association told Yicai yesterday.

Five government bodies, including the Ministry of Industry and Information Technology, will work together to make the controls on steel output more precise, said Shi Hongwei, who is also director of the association’s market research department.

Steel prices slumped in the first quarter because of a lack of demand, which was prolonged due to factories reopening late after the Chinese New Year break in February. This, together with the high price of the raw material iron ore, squeezed steelmakers’ profits, said Jiang Wei, vice chairman and secretary general of the CISA.

Major steel mills’ combined profit plunged 47.9 percent in the first quarter from a year ago to CNY8.7 billion (USD1.2 billion), according to data released by the association yesterday. While revenue slumped 4.5 percent to CNY1.4 trillion (USD205.7 billion). The average profit margin shrank 0.49 percentage point over the period to 0.58 percent.

Production in China’s steel sector was steady in the three months ended March 31, the association said. This is despite difficulties such as a severe imbalance in supply and demand, a sharp drop in the price of steel and the high price of iron ore.

China produced 257 million tons of crude steel in the first quarter, a 1.9 percent dip from a year ago, according to the National Bureau of Statistics.

This still outstripped apparent consumption, which is a measure of domestic demand and includes the sum of production plus imports minus exports. This slumped 4.7 percent over the period to 232 million tons.

Steelmakers’ inventories have declined sharply since the start of April, Jiang said. Steel mills, especially industry leaders, need to control output and reduce inventories in order to keep the market stable.

The National Development and Reform Commission said earlier this month that it will work with four other government bodies to adjust and optimize steel output to ensure the high-quality development of the sector. China started introducing a ceiling on steel production in 2021.

Editor: Kim Taylor