Chinese steel prices are unlikely to rise significantly in the coming term under the pressure of high supply, despite firm demand from end-users in the traditional peak season for steel consumption, according to the monthly report of the China Iron & Steel Association (CISA) published on September 17.
Domestic steel demand is expected to keep growing in the near term, thanks to Beijing’s series of measures to support the economic development. At the same time, China has entered a traditional peak season for steel consumption, now that the cooler weather over September-October is encouraging outdoor construction work, the association pointed out.
However, the buoyant steel output is putting great pressure on the domestic steel market, dampening steel prices, CISA mentioned.
In August, China produced 94.9 million tonnes of crude steel, higher by 8.4% on year, with the daily output up 1.6% on month to a record high of 3.06 million tonnes/day, CISA said, quoting data from the country’s National Bureau of Statistics.
Domestic steel production has remained at a high level this month, though the daily crude steel output had retreated mildly compared with that for August, to average 2.96 million t/d over the first ten days of September, the association estimated, based on the production record of its member steel mills.
At the same time, steel stocks are still very high and so cannot lend too much support to domestic steel prices, CISA noted. For example, total stocks of the five major steel products comprising rebar, wire rod, HRC, CRC and medium plate held by traders in the 20 cities across China checked regularly by CISA had reached 12.4 million tonnes by the end of August, marking a sharp rise of 81.1% from the beginning of 2020, despite the on-month decrease of 1.8%.
Meanwhile, domestic steel mills’ profit margins have been squeezed as the growth in iron ore prices has been much faster than the increase in steel prices, the report said. As of September 14, the price of Fe 62% imported iron ore fines registered $128.9/dmt CFR China, soaring by 40.5% from the beginning of this year, while CISA’s Composite Steel Price Index only witnessed an increase of 1% during that period, CISA observed.
China’s steel market also faces great pressure from the global market where China’s steel exports are struggling and imports of finished steel products and billet are increasing, mainly due to the lacklustre demand from overseas buyers and the relatively high steel prices in China’s home market, the association warned.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
Photo: World Steel
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