Chinese steel prices are expected to remain rangebound in the weeks ahead, according to the latest monthly report of the China Iron & Steel Association (CISA) published on November 20, which noted that as the weather in northern China turns gradually colder, the country will enter the off-season for steel consumption.
“Domestic steel demand may shrink to some extent as the weather chills, and steel prices are unlikely to see sharp growth in the coming term,” the association said in the release.
However, steel output is still at a relatively high level, which may upset the balance between supply and demand, and hamper any further rise in steel prices, CISA warned.
Over November 1-10, daily crude steel output among CISA’s member steel mills averaged 2.15 million t/d, up 8% on year. Based on the production of its member mills, CISA estimated that the country’s daily crude steel output registered 3 million t/d over the first ten days of November, higher by 13.8% from the same period last year, indicating the great pressure the supply side is exerting.
This was despite the fact that the stocks of the five major steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate held by traders in the 20 major cities under CISA’s survey had kept shrinking in early November, easing the market pressure to some extent. Total steel inventories at the surveyed traders’ warehouses reached 10 million tonnes as of November 10, down 11% from ten days earlier.
Besides, the growth in Chinese domestic steel prices over the period was much lower compared with the sharp rise in prices of imported iron ore, a situation not conducive to domestic steel mills reducing their production costs and increasing their profit margins, the association pointed out.
As of November 19, the price of Fe 62% imported iron ore fines was $126.2/dmt CFR China, up by a huge 39.4% from the beginning of 2020, while CISA’s Composite Steel Price Index only posted a rise of 6.5% during the same period, CISA’s data showed.
China’s steel exports still face many difficulties, as the global economic recovery has been delayed by the COVID-19 pandemic’s second wave in many countries and regions, and growth in overseas steel demand was subdued, according to the association.
Written by Nancy Zheng, zhengmm@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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