In July, China's industrial value-added above the size of the year-on-year growth was less than expected, hitting the lowest level in August last year. Coal and iron and steel output are divided.

 

China's National Bureau of Statistics said Tuesday that coal production in July was 281.5 million tons, down 2% from a year earlier, a new low since September 2016. In 2018, the cumulative output reached 19.8 billion tons in 1-7 months, an increase of 3.4% over the same period last year.

 

Among them, coke production for steel production dropped 4.3% to 35.51 million tons in July, the lowest since December 2017, and the cumulative production of 247.46 million tons in January-July this year, a 3.3% drop from the same period last year.

 

Contrary to the historic low in coal production, steel output reached a record high for the fourth consecutive month in July.

 

The steel output in July this year was 95.69 million tons, up 8.0% year-on-year, exceeding the same level in June (7.2%). The cumulative output in January-July this year was 6.6% year-on-year.

 

Iron and steel are similar to coal in environmentally friendly environments where production capacity is reduced, but why are production trends diverging?

 

The market believes that the direct decline in coal production is due directly to the policy of environmental protection and limited production to curb coal mining. Environmental protection checks and shutting down coal mines are being intensified. The output of the three regions in the three regions of Shanxi, Shaanxi and Mongolia, with the highest output, was restrained by various degrees.

 

According to the 21st century economic report, Fenwei energy and coal analyst Zeng Hao said that since May this year, including Inner Mongolia, Shaanxi and other major coal producers have ushered in a wave of environmental protection inspections, some open-pit mines in Inner Mongolia have been shut down, the proportion of capacity impact is about 10%.

 

He Lifeng, director of the National Development and Reform Commission, revealed at a press conference at the 1st meeting of the 13th National People's Congress that coal will be dissolved by 250 million tons in 2017, by 290 million tons in 2016 and by 540 million tons in two years. In 2018, the "government work report" put forward that in 2018, it will withdraw from coal production capacity of about 1.5 billion tons.

 

While steel production remained at a high level for four consecutive months, the market believed that the supply-side reform effectively reduced the size of the excess capacity gap of steel, supported the rebound in steel prices, and steel enterprises actively pursued profits.

 

In addition, although the production capacity is limited, many steel enterprises have increased the operating rate. In an email to Bloomberg News, Goldman Sachs Hong Kong analyst Trina Chen said the same blast furnace could produce 10% more crude steel than ever before, Wall Street sources said. Steel companies also use rich iron ore to increase productivity, and the proportion of scrap in raw materials has increased from 10% to 30%.

 

At the same time, the current production restriction policy has undoubtedly driven the market expectations: the winter production restriction measures will be more stringent, driving steel prices are likely to rise further, steel mills will continue to expand production willingness. Before winter comes, steel mills will only tend to seize the time to expand production.

 

Real estate investment data released by the Bureau of Statistics today show that in the first seven months of this year, the national real estate development investment increased by 10.2% year-on-year, showing a marked acceleration, and returned to double-digit growth, higher than the same rate of 9.7% in the first six months. Steel growth accelerated, and real estate development investment growth to return to two figures also related.

 

According to the Economic Observer, industry insiders pointed out that the easy-to-go production capacity in the early stage has basically been resolved, and finally this division will be more difficult. The biggest problem of capacity this year is to prevent nominal production capacity replacement. In the second half of this year, the policy of limiting environmental protection will continue to exert force, which will have a certain inhibition on steel output.