Any large increase in Chinese domestic steel prices in the near future is hard to envisage as no major changes in either demand or supply are anticipated, the China Iron & Steel Association (CISA) predicted in its latest monthly report. In fact, when the rainy season and hot summer weather cause steel demand to gradually soften, prices are likely to retreat, the association believed.
“From the demand side, there have been some softening signals, though overall demand still remains robust,” CISA commented in the report.
For individual end-user sectors, the property market has gradually cooled off under the strict controls imposed by the central government, while in South China, some construction contractors will have to slow their operations when the rainy season intensifies, CISA said. In parallel, the chronic shortage of semiconductors will continue to hamper domestic automobile production, while white goods output has also slackened off this quarter, the report noted.
On the other hand, steel supply has generally remained stable, as most Chinese steelmakers are still maintaining high steel output and are unwilling to lower their production, CISA observed. The easing of demand and the stability of supply might undermine any upward momentum of steel prices, the report concluded.
According to the association’s latest release, over the first ten days of June daily crude steel output among CISA member mills had reversed up by 2.15% from May 21-31 and averaged 2.34 million t/d.
The softening of steel demand had led finished steel stocks at steel plants of CISA member mills to rise by 820,000 tonnes or 6.1% to total 14.23 million tonnes by June 10, from the volume at end-May.
Specifically, the stocks of the five major steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate in 20 cities nationwide tracked by CISA have been falling since March, and by June 10 had declined to 10.81 million tonnes, down by 170,000 tonnes or 1.5% from the volume by May 31, the report noted. However, the size of the decline was 5.7 percentage points lower than that of late May, CISA shared.
For the near future, CISA alerted steelmakers to some issues they should pay attention to. For example, in line with the softening steel demand, mills should arrange their production pace to ensure that iron ore markets remain stable.
Moreover, the association noted that the rather high level of iron ore prices now, together with Beijing’s removal of tax rebates on most of the commercial-grade steel exports from May 1, will also have some impact on steel mills’ costs and exports.
Chinese prices of steel and iron ore have fallen from the historical highs reached in early May, Mysteel Global notes, and so far this month steel prices have dropped further while iron ore prices, in contrast, have proven more resilient and are hovering at relatively high levels.
China’s national price of HRB 400 20mm dia rebar under Mysteel’s assessment, for example, had retreated to Yuan 4,984/tonne ($769/t) as of June 22 after staying above Yuan 5,000/t since April. This was down Yuan 261/t from June 1.
Nevertheless, over the June 1-22 the Mysteel SEADEX 62% Australian Fines index has fluctuated between $201.9-221.75/dmt CFR Qingdao, North China’s Shandong province. On June 22, the price index was still at Yuan $211.75/dmt, even $4.3/dmt higher from June 1.
Written by Victoria Zou, zyongjia@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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