WEEKLY: Near-term outlook on China’s steel products

• Long steel prices face pressure from weak construction demand
• Flat steel prices remain constrained by persistent oversupply

Below is the brief near-term outlook for five key steel products Mysteel shares on a weekly basis, drawing upon the results of related surveys and communication with Chinese market participants.

Rebar & wire rod: China’s prices of the two major long steel items are expected to post further falls over August 10-14, mostly pressured by sluggish downstream demand. Strong winds and heavy rainfalls brought by Typhoon Dolphin struck eastern China on Sunday and will further dampen long steel demand during the seasonal lull. On the other hand, the recent contraction on the supply front due to mills’ negative profit margins is projected to provide some support and ease part of the downside pressure on construction steel prices.

Hot-rolled coil: Chinese HRC prices are projected to stay around recent lows this week amid a persistent market oversupply. Despite steel mills’ slight curtailments in their HRC production recently, retail inventory pressure persists as most end-users hold a cautious stance, only purchasing stocks on a need-to basis. Overall transactions for spot HRC cargoes remain lackluster and limit the impetus for the prices to rebound.

Cold-rolled coil: CRC prices are likely to be rangebound over the week ending August 14. Although the derivatives market recovered late last week, overall market sentiment stayed cautious during the summer lull. As such, most traders are expected to keep their CRC offers at current levels to facilitate more sales rather than raise prices and build up stocks for further sentiment lifts.

Medium plate: Medium plate prices are expected to be rangebound over August 10-14. The rebound seen in mills’ production of this flat steel item serves as an important factor weighing on prices of medium plates, but market expectations for high rigid demand in the latter half of this month, together with the still-resilient cost support, are likely to underpin prices going forward.

Sections: Steel section prices are likely to post small drops over August 10-14. Relatively low prices in the near term have led to increasing maintenance stoppages, but high temperatures and frequent rains and floods will disrupt or even fully suspend some outdoor construction projects, keeping downstream demand low and therefore pressuring on market confidence.