Chinese steel prices are expected to remain range-bound in the coming term as both output and demand are seen returning to normal, thanks to further successes in the country’s battle against COVID-19, according to the latest monthly report of the China Iron & Steel Association (CISA).
Domestic demand from steel users is expected to recover at a faster pace in response to the easing of restrictions to combat the spread of the COVID virus and measures unveiled by the central government aimed at stabilizing economic growth, the association pointed out.
China’s steel supply and demand are in balance overall, and both production and consumption are expected to recover with the gradual launch of new public works projects, CISA noted.
For the first 10 days of this month, daily crude steel output among CISA’s member steel mills averaged 2.31 million tonnes/day, down 2.3% from that for late April. Based on the result, the association estimated that daily crude steel output nationwide slipped by 1.7% during the same period to 3.07 million t/d.
For the moment, the impact of COVID-related control measures in some regions is preventing transport services from fully returning to normal, resulting in the further uptick in stocks held by domestic steel mills, CISA said.
As of May 10, total stocks 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 had swollen to 18.75 million tonnes, higher by 3.6% from the end of April.
However, steel inventories at traders’ warehouses had declined somewhat, indicating that demand from end-users has already started to kick in, CISA’s release showed.
Total stocks of the five key steel items in the 21 Chinese cities under CISA’s survey came in at 12.45 million tonnes as of May 10, down 2% from ten days earlier.
The association suggested that Chinese steel mills pay close attention to changes in demand from end users and arrange their production reasonably to maintain domestic steel-market stability.
In parallel, domestic mills still face great pressure to reduce their production costs, as the prices of major steelmaking raw materials such as iron ore, coking coal, coke and scrap, have been hovering at high levels, CISA warned.
For example, by the end of April, the prices of coke and coking coal had surged by 52.3% and 42% respectively compared with the beginning of this year, while domestic steel prices only rose by 6.3% during the same period, according to the report.
Written by Nancy Zheng, zhengmm@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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