Steel and its raw material prices
The domestic steel prices in China which were on a roll since the start of Apr’18 have gradually stabilised in the second week of May amid balance between demand and supply. However, the raw material prices such as that of coking coal and iron ore still continue to surge.
Analysing China’s domestic prices in mid-May, steel prices have remained almost stable against prices in early May’18 with just minor fluctuation of RMB 50/MT (USD 8/MT) while the iron ore prices continued to surge. The iron ore’s shipment price including the VAT (Value-added-tax) at present is about RMB 483/MT (USD 76/MT), up by RMB 7/MT (USD 1/MT) against first week of May whereas the import price of Australian coking coal have remained at the same level against last week at RMB 1,420/MT (USD 224/MT).
The surging production and falling inventory
In case of various steel products, although their production volume increased by 2-3% in May, the steel producers and market inventory volume continued to decline.
As per market sources, the rebar inventory decreased by 550,000 tonnes to 6.51 MnT, wire rod plunged by 110,000 tonnes to 1.80 MnT, HRC declined by 50,000 tonnes to 2.26 MnT and heavy plates inventory decreased by 10,000 tonnes to 870,000 tonnes against last month.
Although the fall in market inventories has slowed down this week against last week due to increase in production volumes, it is still showing a significant decline from the previous year. Thus the increasing production volumes and declining inventories clearly suggest that the domestic demand in China is quite healthy at present.
The outlook for rest of the month
The overall steel market in China is likely to remain flat this month with stability in raw material and steel prices in the upcoming days.
However, while in this week, the fall in inventory has slowed down a bit and steel-makers inventory has shown upward trend, the steel prices have remained flat. This suggests that inventory factor is no longer playing major role in steel price hikes and that the prices will remain stable irrespective of stocks.
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