Growth in Chinese domestic steel prices is expected to narrow in the coming term with the further shrinking of demand, despite the support provided by the sharply rising prices of major steelmaking raw materials, according to the latest monthly report of the China Iron & Steel Association (CISA) published on December 16.
Domestic steel prices continued to move up in November, mainly thanks to the firm demand of steel end-users and the robust raw material prices, including those of imported iron ore, coking coal, coke and scrap, the report mentioned.
However, “steel demand is likely to see a downtrend in the coming term, as the domestic market has entered the traditional off-season for steel consumption due to temperatures gradually falling from north to south China,” the association observed.
In parallel, steel output remains at a relatively high level, which may also place some pressure on the domestic steel market, CISA said in the report. Over December 1-10, daily crude steel output among CISA’s member steel mills averaged 2.2 million t/d. Based on the production of its member mills, CISA estimated that the country’s daily crude steel output averaged 2.91 million t/d in early December, up 0.8% from the prior ten days, as Mysteel Global reported.
As of December 10, 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 shrunk further to 7.6 million tonnes, down 9.2% from the end of November, while inventories held by CISA’s member mills saw growth of 11.5% during the same period to 12.7 million tonnes, CISA’s data showed.
Chinese steel exports still face many uncertainties and difficulties with the international situation remaining unstable. Steel supply overseas may recover gradually with the effective control of the pandemic and with new steel mills commissioning in Southeast Asia, suggesting that China’s steel exports are unlikely to keep stable at a high level, the association warned.
For November, China exported 4.4 million tonnes of steel products to overseas buyers, representing a significant increase of 360,000 tonnes or 9% from the previous month, CISA said, quoting the data from China’s General Administration of Customs.
Although the rapid rise in steelmaking raw material prices may lend some support to domestic steel prices, this will also put the profitability of domestic steel producers under considerable pressure. As of December 11, the price of Fe 62% imported iron ore fines was at $155.15/dmt CFR China, up 19.3% from the end of November or surging by 71.4% compared with the beginning of 2020 – an increase in price that vastly outpaced the growth in steel prices during that period, CISA noted.
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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