Chinese steel prices are likely to increase this month, bolstered by the supportive macro-economic environment and better on-year fundamentals, according to the monthly outlook of Wang Jianhua, Mysteel’s chief analyst, published on January 30.
Market inventories of steel nationwide are lower on year, according to Wang, and stock accumulation during and after the Chinese New Year (CNY) holiday period (January 31-Feburary 6) is expected to be slower than in past few years.
As of January 28, inventories of the five major steel products – rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate – at the 184 Chinese mills and among the commercial warehouses in the 35 Chinese cities Mysteel surveys regularly had decreased by 13% or 2.3 million tonnes on year.
Steelmakers in some regions have been ordered to observe strict production limits while the country hosts the Winter Olympic Games in and around Beijing over February 4-20, the report notes, pointing out that steel output among mills in North China’s Tangshan, for example, may decline by a total of 60,000 tonnes/day.
Wang predicts that steel stocks may decrease by around 1 million tonnes, due to the production curbs.
The profits that mills are enjoying will also affect their steel production, Wang said. On January 28, the average profit that domestic electric-arc-furnace producers were earning on sales of rebar was just Yuan 32/tonne ($5/t), while blast-furnace producers saw their profits on rebar reach an average of Yuan 410/t, Mysteel calculated based on prevailing raw materials and steel prices.
“The prices of iron ore, coke and steel scrap all moved up modestly before the holiday, and these rises, no doubt, will drive up steel production costs during and post-CNY,” Wang said.
Wang also pointed out that once the restrictive measures on them are loosened, more mills may resume production – encouraged by the high profits and to offset rising production costs.
As for steel demand, this is expected to be released earlier than in previous years, and this may bolster market sentiment to some extent. Meanwhile, work on newly launched infrastructure projects may also accelerate gradually after the holiday, according to Wang.
Written by Olivia Zhang, zhangwd@mysteel.com and Rong Zhang, zhangronga@mysteel.com
This article has been published under an exchange agreement between MySteel Global and SteelMint.
Leave a Reply