China: Near-term outlook on key steel products

• HRC prices likely to gain on restocking demand
• Long steel output hits four-year low amid improving demand

Below is the brief near-term outlook for five key steel products Mysteel shares on a weekly basis, drawing upon the results of related surveys and communication with Chinese market participants.

Rebar & wire rod: China’s prices of the two major long steel items are expected to extend uptrends over 31 August-4 September, mainly buoyed by firm cost support and recovering market fundamentals.

Inventory pressure is projected to ease further, given that domestic mills’ weekly long steel output has sunk to a four-year low, while expectations for an uptick in downstream demand have strengthened following the abatement of summer heat throughout the country.

The combined output of rebar and wire rod among the 137 steelmakers under Mysteel’s coverage came in at 2.48 million tonnes during 20-26 August, dropping by 2.4% or 60,000 tonnes on week.

Hot-rolled coil: Chinese HRC prices are projected to gain further this week. Demand for the flat steel product is likely to recover as major downstream sectors like manufacturing, steel structure and automobile have started restocking. The rebounding demand will provide support to HRC prices along with dropping domestic output and higher input costs.

Cold-rolled coil: CRC prices are likely to stay robust over the week ending 4 September. Spot CRC prices strengthened amid upbeat market sentiment in the past week, mainly boosted by the strong performance of major ferrous futures contracts. But most traders have maintained a cautious stance for the near-term market as bulk purchasing by downstream buyers hasn’t kicked off.

Medium plate: Medium plate prices are expected to rise further over 31 August – 4 September. The destocking of medium plate inventories gathered pace last week, indicating a seasonal rebound in downstream demand. This, combined with strengthening cost support, would collectively underpin domestic prices of medium plates.

Sections: Steel section prices are likely to remain firm over 31 August – 4 September. Elevated production costs are likely to dampen re-rollers’ production enthusiasm in the near term, while downstream demand may also pick up gradually. Against a backdrop of rebalancing market fundamentals, higher prices of major steelmaking raw materials are expected to provide support for section prices from the cost front.