China's steelmakers are smashing production records by pushing furnaces beyond their typical limits, offsetting nationwide closures that may be even more swingeing than government estimates, according to Goldman Sachs Group Inc.
The world's top producer has trumpeted sweeping reforms in the past two years that have shuttered aging and illegal plants, and shackled winter output in the dirtiest regions. At the same time, official data shows output at record highs. That's partly because, with demand robust and margins high, mills have rewritten their steel-making recipes to push output beyond normal capacity, says Goldman's Hong Kong-based analyst Trina Chen.
"For the same blast furnace, mills can deliver an extra 10 percent or more steel than before," Chen said by email. Operators are using iron-rich ores to boost productivity, and raising the portion of steel scrap in their feed-stock to as much as 30 percent from about 10 percent historically. "The trend is continuing this year but they are approaching their stretchable limit," she said.