Steel makers bring forward maintenance to curb oversupply

Chinese steel makers are bringing forward plant maintenance as they look to curb oversupply that helped knock nearly one-third off prices last year in the world's top producer of the alloy, industry sources said.

Leaner demand in winter, when construction activity typically slows, has also forced steel mills to keep low iron ore inventories, piling more pressure on prices for the steel-making ingredient that have plunged close to their weakest in five and a half years.

Chinese steel producers, including the biggest private mill Jiangsu Shagang Group and Hebei Province-based Tangshan Iron & Steel, are scheduling maintenance on some facilities, according to industry consultancy Custeel.

"The difference this year is that in order to trim production, many mills in North China have brought forward maintenance plans, which traditionally happen during the lunar new year, as prices have fallen too quickly and many rebar producers have been losing more than 100 yuan ($16) a ton," said Cheng Xubao, an analyst with Custeel who has spoken to several mills.

The lunar new year holiday this year kicks off on February 19.

"We are making a loss of more than 200 yuan a ton and have had to conduct maintenance on one blast furnace which may last until after the Spring Festival," an official with a small steel mill in Tangshan, North China's Hebei Province told Reuters.

According to Custeel, 12 large mills will cut their total output by an estimated 896,000 tons during scheduled overhauls over January and February.

China's total steel output in December jumped 7.6 percent from the month before to around 69 million tons.

Inventories of the five main products, including rebar and hot-rolled coil, had surged 8.07 percent to 10.41 million tons by January 16 from the end of 2014, the China Iron & Steel Association said in a report on Thursday.