Chinese producers of cold-rolled coil (CRC) are expected to step up production gradually starting July from the historical low recorded in May, as the mills secured more orders in June and July, according to Mysteel’s latest report released on July 9.
In this year’s first half, weak demand due to the COVID-19 outbreak and the losses the mills were generating making CRC led rolling capacity utilization to slide to a historical low in May, with the losses continuing into June. However, the quantity of new orders that mills concluded in June and July has encouraged steelmakers to boost production, according to the report.
Rolling capacity utilization for July is expected to rise by 3.5% on month and by 3% on year to average 78% from its historical low of 68.89% in late May, it said, adding that major maintenance projects were already completed in the first half and that further stoppages are unlikely to affect CRC supply in H2.
Rolling capacity utilization rate among 29 sampled steelmakers
Unit: %
Source: Mysteel
The trend in China’s domestic CRC prices was V-shaped in H1 as the demand recovery starting late April stimulated a recovery in prices. However, the price gap between hot-rolled coil (HRC) and CRC formed an inverted V during the six months as CRC displayed comparatively weak fundamentals, which squeezed the margins the mills were earning on their cold coil, the report stated.
China’s price of 1mm CRC declined by Yuan 600/tonne ($85.7/t) from January 23 to reach a near three-year low at Yuan 3,821/t on April 29, before recovering to Yuan 4,190/t as of June 30, Mysteel’s data showed.
The price gap between 1mm CRC and 4.75mm HRC
Unit: Yuan/t
Source: Mysteel
“Thanks to the good performance of domestic infrastructure investment, demand for HRC rapidly increased in Q2. Although demand for CRC strengthened too, this was still not enough to expand the price spread,” the report explained, adding that the price gap was expected to stay narrow.
For the coming six months, China’s flat product makers will be hoping that the domestic automobile industry finds the accelerator. During H1 the COVID-19 outbreak crashed head-long into the country’s auto-manufacturing sector, a huge consumer of cold rolled coils for body panels and components, as Mysteel reported. Over January-May, China’s auto sales plummeted by 22.6% on year to nearly 8 million units while production dropped by 24.1% on year to 7.8 million units, according to the latest data from the China Association of Automobile Manufacturers.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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