Huge losses of steel mills and government’s fiscal measures are likely to stablize prices in oversupplied Chinese market.
After eight months of continuous price fall, China’s biggest steelmaker, China Steel Corp (CSC) has recently declared to keep its prices unchanged for December deliveries.
Even Baosteel, China’s one of the largest steel players, has rolled over its prices for November deliveries. This can be an indication that Chinese steel prices won’t descent below current levels.
As per market sources, losses for the Chinese steel industry totaled to RMB 14 bn (USD 2.8 bn) in the 1st eight months of 2015 as compared to profit of RMB 14 bn in the same period of previous year.
High debt and losses are forcing steel players to cut their production. China’s crude steel output fell by 3% Y-o-Y to 66.12 MnT last month.
Furthermore, it is reported that Chinese steelmakers are planning 20% cut in steel production in coming months. This move will help to clear inventories and stabilize prices in the oversupplied market.
Chinese government has recently reduced its 1-year lending rate to 4.35% from 4.60% and 1-year reserve ratio to 1.50% from 1.75%. These economic stimulus measures are anticipated to boost domestic demand in the country.
Fall in Chinese Steel Inventories
As per SteelMInt study, China’s HRC inventory was at its peak in Apr’15 at 0.84 MnT . The higher trend continued till Jul’15, however the same reduced drastically in Aug’15 at 0.53 MnT.
Even in Oct’15 HRC inventory registered a fall of 21% as compared to Sept’15 and stands at 0.56 MnT. As further production cut is anticipated in China, prices are likely to gain stability in coming months.
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