China’s steel production is expected to stay high in June as domestic steelmakers have been securing some profits, industry watchers predict. However, concerns are being raised about steel demand retreating both at home and abroad, they admit.
“The fundamentals of steel are firm this month, and domestic steelmakers have been making some profits, especially those producing rebar. By the end of May, the margins that integrated mills were earning on rebars had reached about Yuan 400/MT (USD 56/MT),” a Shanghai-based analyst said, indicating the profits have encouraged mills to maintain production.
Daily crude steel production would exceed 2.9 MnT/day for May, the analyst predicted, which compares with daily output for April recorded by China’s National Bureau of Statistics of 2.83 MnT/d. Over May 21-27, rebar production among the 137 long steelmakers monitored by Mysteel had refreshed its historical high to reach 3.9 MnT.
Besides the high production, market sources expressed concerns about steel demand in the near term due to weather factors, Mysteel Global noted. “Guangzhou (South China) has been experiencing continuous rains for days, affecting outdoor construction work,” a local steel trader said, warning that the Wet Season rains may linger perhaps until mid-June.
Another steel trader in Central China’s Henan province told Mysteel Global that daytime temperatures there had already reached as high as 37 degrees Celsius, which also makes work on building sites uncomfortable.
Besides the concerns about domestic demand, China’s steel exports are under even more severe pressure. “Our domestic steel prices are too high. Steelmakers are offering a high price of no less than USD 430/MT FOB for hot-rolled coil which would never be accepted by overseas buyers. Mills are more relying on domestic sales,” a Shanghai-based steel exporter said. “Given the impact of COVID-19, steel exports for the whole year will stay low,” she added.
The escalation of Sino-US trade friction is also weighing on market sentiment. “Direct steel exports will not feel much effect but exports of steel-dependent products like home appliances will be hurt, which will further impact steel consumption,” she stated.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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