China’s domestic steel prices are expected to stay high in the coming term, the traditional peak season for steel consumption in China, as the accelerating growth in the global economy is likely to keep demand rising, according to the latest monthly report of the China Iron & Steel Association (CISA).
However, domestic steel prices are unlikely to climb further as end-users are resisting accepting the previous sharp rise, according to the association.
The global economic outlook has improved significantly with the pandemic control measures being put in place and from the financial support of major economies, CISA noted. The latest report of the Organization for Economic Co-operation and Development (OECD) published on March 9 showed that the global economy may grow 5.6% in 2021, higher by 1.4 percentage points compared with the OECD’s estimate last December.
As for the domestic market, 2021 is the first year of the 14th Five-Year Plan and that the target for the country’s gross domestic product (GDP) growth is proposed to be at least 6% on year, the association noted. This indicated more positive policy support this year, which may boost domestic steel demand, it said.
On the other hand, steel supply across China will be constrained by strengthened central and local government measures to reduce carbon emissions to enable China to reach peak carbon emissions by 2030 and carbon neutrality by 2060. The country will resolutely reduce crude steel production in 2021 and achieve an on-year fall in the output, CISA noted.
With the improved demand from steel users, finished steel inventories are likely to decrease in the coming term despite the increase in early March. As of March 10, finished steel stocks held by CISA’s member mills had swelled by 53.9% from the beginning of this year to 17.9 million tonnes, the release showed.
China’s steel market still faces many challenges. For example, the rapid growth in crude steel output may put some pressure on the balance between supply and demand. Over the first two months of this year, China’s crude steel production witnessed substantial growth of 12.9% on year to 175 million tonnes.
Besides, high raw materials prices are exerting further pressure on Chinese steel mills’ production costs. As of March 12, CISA’s Composite Steel Price Index (CSPI) was 132.63, up 33.5% from one year earlier, while the price of Fe 62% imported iron ore fines rose by a larger 88.9% during the same period to $167.33/dmt CFR China, according to the report.
Although the global economy has recovered to some extent, China’s steel exports still face a lot of uncertainties, the association warned, pointing out that countries in Europe and the Americas are struggling with new mutated strains of the coronavirus while international trade relations remained strained.
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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