China's Guangdong and Yunnan Provinces have successively issued measures to restrict the supply of industrial electricity since mid-May. Authorities say the measures were implemented due to tight power supply in these two provinces and the approaching peak summer demand season, Kallanish notes.

A survey of 17 steel companies in Guangdong Province shows that more than 80% of steel companies have received notices of power cuts, and more than 47% of them have lost output as a result.

Electricity restrictions are expected to cause surveyed companies to reduce their monthly output of building materials by 90,000 tonnes, accounting for about 4.5% of total output. Guangdong's power cuts this year are about two months earlier than in previous years, market sources say.

At present, about 23,900t of finished steel output in Yunnan has been reduced due to power curtailment, and about 40% of steel mills have seen limited power supply, which has affected production. A small number of mills with more self-owned power generation will be less affected in the short term, but could also be affected if restrictions are extended. The current electricity curtailment in Yunnan will mainly affect rolling mills.

The Chinese steel market is still in a downward trend, and the reduction in output caused by power curtailment has not affected overall market sentiment. Demand for construction steel has begun to weaken as summer approaches.