Over the coming term, China’s domestic steel prices will likely keep hovering at the current high level, supported by the recovered demand from end-users after the Chinese New Year holiday and high raw materials costs, according to the latest monthly report of the China Iron & Steel Association (CISA) published on February 23.
Steel demand will keep growing, thanks to central government measures to bolster the domestic economy in this, the first year of China’s 14th Five Year Plan over 2021-2025, CISA noted.
Besides, downstream industries including infrastructure construction, real estate and manufacturing are expected to restart work sooner after the February 11-17 CNY holiday, now that the coronavirus resurgence has largely been brought under control, the association pointed out.
Steel demand overseas may recover with the improving international situation regarding the pandemic. China’s steel exports are likely to keep stable as the global economy has shown signs of turning around, now that COVID-19 vaccination programs are being stepped up, the report said.
However, the high levels of production among Chinese mills may place some pressure on the domestic market when demand from end-users has yet to fully recover.
Over the first ten days of February, daily crude steel output among CISA’s member mills registered 2.15 million tonnes/day. Based on its members’ steel output, CISA estimated the nationwide daily crude steel output averaged 2.81 million t/d over February 1-10, down 3.5% from the average for January.
Despite the decrease in early February, China’s daily steel output was still higher by 7.5% compared with the same period last year, which may undermine the balance between supply and demand in the coming term, according to CISA.
Finished steel stocks at mills’ yards and in traders’ warehouses have increased significantly. As of February 10, total inventories of the five steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate held by traders in the 20 major cities under CISA’s survey had increased to 11.3 million tonnes, up 16.5% from the end of January, while those held by CISA’s member mills grew 5.1% during the same period to 14.5 million tonnes, the release showed.
Chinese steel producers face more pressure from raw materials costs due to the sharp growth in raw material prices. As of February 19, CISA’s Composite Steel Price Index (CSPI) was 127.53, up 2.4% from the beginning of this year, while the price of Fe 62% imported iron ore fines rose by a larger 7% during the same period to $170.72/dmt CFR China, 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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