China: Near-term outlook on key steel products

• Weak construction demand limits long steel price upside even as coke costs rise
• Falling futures, rising stocks to keep HRC under pressure despite output cuts

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 and wire rod: China’s prices of the two major long steel items are expected to fluctuate within narrow bands over 14-18 September amid resilient cost-side support and tepid recovery in downstream demand.

With the fifth hike in coke prices exacerbating mill profitability, more steelmakers are likely to conduct production curtailments in the days ahead. On the other hand, market caution may grow further with lower-than-expected steel demand from construction sites. The pace of special-purpose bond issuance has remained slow so far this month, limiting any meaningful improvement in project funding.

Hot-rolled coil: Chinese HRC prices are projected to be range-bound this week. Weakening futures prices and rising HRC inventories in the past week point to fading market confidence as demand recovery has remained slow during the traditional peak season. However, deeper losses among HRC producers are likely to prompt further supply-side adjustments this week, offering some support to HRC prices alongside stable orders from shipbuilders and automakers.

As of 10 September, HRC inventories at traders in the 55 Chinese cities monitored by Mysteel totalled 4.86 million tonnes (mnt), edging up by 5,800 tonnes (t) on week and marking the only increase among the five major finished steel products — rebar, wire rod, HRC, CRC and medium plate.

Cold-rolled coil: CRC prices are likely to post small declines over the week ending 18 September. Most market participants maintain cautious stances as they note that actual steel consumption has yet to show clear signs of a seasonal pickup. Moreover, weakening ferrous futures have cooled market sentiment, prompting most traders to liquidate stocks by lowering prices amid tepid spot transactions.

Medium plate: Medium plate prices are expected to drop slightly over 14-18 September amid sluggish spot trading sentiment. Most end-users are expected to stay wary of bulk purchasing and to replenish on a need-only basis, while traders are likely to offer discounts to conclude deals. Demand from shipbuilding, pressure vessels and wind tower plates has remained resilient but is providing little support to the spot medium plate market, as most resources are shipped directly from mills to end-users.

Sections: Steel section prices are likely to witness mild slides over 14-18 September, pressured by weakening market fundamentals. Section steel production has recovered following the restarts of some rolling mills, but most downstream construction projects are expected to purchase only to meet immediate needs, which will weigh on prices of steel sections. However, the declines are likely to remain modest, given the still-firm raw material costs.

Note: This article is published as part of a content exchange agreement between Mysteel Global and BigMint.