- Weak demand, rising inventories to weigh on prices
- Output unlikely to fall sharply amid healthy mill margins
Mysteel: China’s steel prices are likely to move within a narrow range in the near term, with relatively strong supply against a persistent weakness in demand, according to the latest monthly report of the China Iron and Steel Association (CISA).
The association pointed out that China’s steel output is unlikely to see a significant fall in the short term, as many domestic steel producers would like to keep their run rates high given their healthy profit margins.
During the first ten days of this month, daily crude steel production among CISA’s member mills averaged 2.07 million tonnes (mnt)/day, up by 4.7% from the late-July average. The average output in mid-August increased further to 2.11 million t/d.
However, domestic steel demand remains depressed, resulting in an accumulation in steel inventories and putting pressure on steel market fundamentals, the association noted.
As of 10 August, inventories of the five major steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate held by CISA’s member mills reached 15.07 mnt, up 2% from the end of July.
During the same period, stocks of the five major steel items in trading warehouses across 21 Chinese cities under CISA’s regular tracking also climbed higher by 2.3% to 8.03 mnt, according to CISA’s report.
On the macro front, China and the United States decided to extend their tariff truce for another 90 days earlier this month after their trade talks convened in Stockholm in late July, temporarily stabilising the export environment. But in the long run, Chinese steel exporters remain exposed to risks associated with prolonged policy uncertainties, the association warned.
China’s steel exports may face more challenges in the second half of this year due to the increasing anti-dumping investigations and a more complex international trade environment. CISA advised Chinese steel mills to keep a close watch on the changes in global steel demand and the impact of trade protectionism and make prompt adjustments in export strategies.
The association said that China’s steel prices are mainly affected by the supply side, with weak steel demand and ample supply of raw materials also in play. It urged domestic steelmakers to rationally adjust production schedules and maintain self-discipline in output control to stabilise steel prices.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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