The Chinese domestic steel market fluctuated upwards in Sept’21 due to the implementation of policies to reduce production, dual policies to curb both energy consumption and supply.
Price of iron ore trended downward, while the price of coke continued to move up due to the upward price movement of raw materials and production restrictions.
In September, with steel production curbs and power curtailment measures, demand for construction steel has recovered to a certain extent, and the supply-demand balance has improved, which has driven prices of steel to strengthen. Building materials prices are stronger than plates.
Decline in inventory
In September, all the present policy measures not only led to reduction in steel production and rise in demand, but also an accelerated decline in steel stocks.
According to Lange Steel, as of 24 Sept’21, the warehouse-level inventory of 29 key cities on the Lange Steel Network was 12.256 million tonnes (mn t), a m-o-m decrease of 6.8% and a y-o-y decrease of 10.3%.
Among these, the inventory of building materials or construction steel was at 7.299 mn t, a m-o-m decrease of 8%, and a y-o-y decrease of 18%. The warehouse inventory of flat products was at 4.957 mn t, a m-o-m decrease of 4.9%, and a y-o-y increase of 4.1%.
Steel mill inventory has also shown a downward trend. But plates have shown a different trend. According to statistics from the China Iron and Steel Association (CISA), in mid-September, the steel inventory of key mills was at 13.302 mn t, a decrease of 1.632 mn t compared to mid-August levels, a y-o-y decrease of 0.8%. Data from Lange Steel Network show that on 24 Sept’21, the inventory of construction steel mills in major regions across the country was at 5.71 mn t, a decrease of 590,000 t from the end of August, a m-o-m decrease of 9.4%, and a y-o-y decrease of 1.4%.
The inventory of these steel enterprises’ medium and heavy plates was at 453,000 t, an increase of 3.4% from the end of the previous month, a m-o-m increase of 8.1%, and a y-o-y decrease of 3.9%.
Outlook
October is the traditional peak season for construction, and there is still room for release of demand for construction steel. Thus, the outlook on demand for construction steel in the current month is relatively optimistic, while the reduction in steel output will continue, and the warehouse and factory level inventories are expected to continue to decline.
Supply and demand both are still expected to improve. The domestic steel market is expected to have room for growth in October.
The sustained increases in coal and coke prices will continue to support a rise in steel prices in the second half of the year.
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