Chinese steel prices should remain rangebound in the coming term, according to the latest monthly report of the China Iron & Steel Association (CISA), given market expectations of supply-demand coming into balance once more.
Steel demand from domestic users is likely to release gradually with the steady recovery of China’s economy, as the results of COVID-19 prevention and control have been further consolidated, the association pointed out.
China’s central government has taken many measures to help develop the economy, to accelerate investment in infrastructure and boost the recovery of consumption in key areas, CISA noted, saying that the effects of these measures may emerge further in the coming term, which may help to improve steel demand in the home market.
Domestic steel supply and demand are expected to achieve a new balance if steelmakers commit to producing based on market demand, the association observed.
For the first ten days of August, daily crude steel output among CISA’s member steel mills averaged 1.94 million tonnes/day, up 2.8% from that for late July. Based on this data, the association estimated that daily crude steel output nationwide grew by 2.08% during the same period to 2.73 million t/d on average in early August.
Steel inventories held by domestic traders continued to empty during the early part of this month, and the volume held by CISA’s member steel mills also continued to decline overall, paving the way for the recovery in market confidence, the report stated.
As of August 10, the total volume of the five key steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate in the 21 Chinese cities under CISA’s survey reached 10.28 million tonnes, down 4.2% from late July or lower by 14.5% on month.
During the same period, inventories of these five steel items held by CISA’s member mills rose by 2.7% from ten days earlier to 17.05 million tonnes, the association’s data showed. The total was still 5.5% lower compared with one month earlier, however.
For the immediate future, Chinese steel producers are expected to pace their production reasonably to guarantee domestic market stability, as steel demand has not shown any significant recovery of late. An aggressive increase in output would dampen any further growth in steel prices, CISA warned.
Besides, domestic steelmakers still face great pressure in trying to improve their profit margins, as the reduction in their production costs has proven far smaller than that in the revenues. Over January-July, the operating income of CISA’s member steel mills dropped by 22.4% on year, while their operating cost only declined by 16.6% on year, the association said in 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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