Chinese domestic steel prices are likely to stay range-bound during the coming term as supply and demand should remain in balance, according to the latest monthly report of the China Iron & Steel Association (CISA) released on October 19.
Going forward, demand from end-users is expected to slow as China will soon enter the traditional off-season for steel consumption with the weather turning colder, CISA warned. In any case, it noted, the country’s economic growth is also showing signs of slowing down.
For the third quarter of this year, China’s gross domestic product (GDP) had slowed to 4.9% on year, well below the growth for the April-June quarter, the association noted.
Investment in real estate, the issuance of local debt and the financing of real estate enterprises may weaken further in the future with Beijing’s imposition of restrictions on housing market speculation. Meanwhile, the growth in other steel-consuming industries such as machinery and automobile manufacturing is also steadily waning, indicating the weakness in steel demand, according to the report.
As for the international steel market, the recovery in the global economy is unstable due to the impact of resurging COVID-19 outbreaks. The latest forecast from the International Monetary Fund (IMF) released in October, quoted by CISA, put global economic growth at 5.9% for 2021, lower by 0.1 percentage point from the IMF’s earlier forecast made in July.
China’s steel supply and demand is expected to reach a new balance in the coming term as steel output may decrease further with the government’s on-going production curbs. “The relevant government ministries are inaugurating a nationwide probe to recheck the progress of steel capacity reductions, and major steel-producing provinces and large steel mills in China have enacted measures to lower their crude steel output,” CISA said.
For September, China’s daily crude steel output fell on month for the fifth consecutive month, easing by 8.5% from August to about 2.46 million tonnes/day, with the monthly output reaching 73.75 million tonnes, down 21.2% on year, CISA said, quoting data from the country’s National Bureau of Statistics.
Chinese steelmakers still face great pressure to reduce their production costs, given the persisting high prices of coking coal and coke, CISA remarked. As of October 15, the national price of coking coal was Yuan 3,815/tonne ($597/t), higher by a massive 156.4% from the beginning of this year, while that of coke had jumped by 76.4% during the same period to Yuan 4,118/t, much higher than the 27.8% rise in steel prices over the same period, the association said.
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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