In the near future, the Chinese government will further control the output capacity of domestic steel mills that produce crude steel. This news boosted the market's medium and long-term optimism.

According to reports, at the end of July, the mills in Yunnan Province successively received documents to limit production, requesting to regulate the production plan of crude steel for 2023. In addition, market participants pointed out that the government's production restriction policy should affect parts of China, such as Hebei, Jiangsu, Shanxi, Tianjin, Guangxi, and Henan provinces.

Adjusting the output capacity of steel mills will help restore margins. However, the reduction allocation of factories in various provinces is different. It is expected that in the second half of the year, the differentiation of main steel grades produced by factories and the growth of demand will gradually form.