Today, there is no significant change on the market and billet price in Tangshan stabilized at RMB 3, 560/MT. The spot price saw difficult transaction on high positions due to overall tepid demand. Looking at the market from the perspective of supply-demand, the overall market performance was somewhat weak because of strong supply and insufficient demand. However, prior to the “labour’s festival, as the market itself will find support in costs in the wake of previous notable decline and possible demand enhancement from downstreams, it is expected that construction steel market may enter a stage of bullish consolidation.
Close the end of April, the steel market experienced plain performance in March, and strong-weak evolvement in April, how will the steel price develop in May has became the focus of the market. Some insiders believe that it stands a big possibility of a decline in May, mainly due to the following points:
Steel supply will outstrip demand following increasing output and falling demand- Since mid-April, steel output has been increasing, but demand weakened. The month May is the off-season of the steel market, where demand will fall seasonally, thus the pressure on steel prices will increase. In terms of demand, the end consumption performance in April exceeded expectations, mainly due to the performance of real estate demand. However, it is questionable whether such consumption intensity is sustainable. Although the growth rate of the sales area of commercial housing has also improved, but the gap with the growth rate of new construction area has been increasing also.
Judging from the recent transaction data of construction steels, the volume of transactions has declined. While the production capacity remains high, and demand is likely to fall sharply in May, and the probability of falling steel prices has increased significantly.
Tight supply of iron ore is eased- After the surge, iron ore prices showed signs of falling back as supply increased. From the perspective of oversea shipments, the total volume of the three major mining companies continued to rise for two weeks, from 6.27 million tons to 12.17 million tons, an increase of 5.9 million tons.
From the perspective of domestic mines, the mines previously closed are gradually resuming following the increase in iron ore prices. As of 28, April, the capacity utilization rate of mines reached 65.19%; at the same time, the inventory at mines has also dropped significantly, indicating that the demand for domestic ores is good. With the increase in imported ore price, steel mills gradually turn to use domestic ores as substitute, thus the cost pressure of imported iron ore price is also decreasing
At present, steel mills still have notable profits, and the probability of rising steel production in May stands high, while the demand for real estate, automobile, and home appliances industries has limited room for growth. Steel prices are expected to fall sharply in May, with a drop of around RMB 200/MT.
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