Posted on 20 Aug 2020
Chinese steel prices are expected to continue fluctuating albeit slightly in the coming term, as the higher steel output may put more pressure on domestic prices – despite expectations of improving demand with the coming peak season, according to the monthly report of the China Iron & Steel Association (CISA) published on August 17.
Steel demand from end-users is expected to recover further during the so-called ‘golden September’ and ‘silver October’, traditionally the peak months for steel consumption, as the hot temperatures and frequent rainfalls in most regions should end in September, CISA pointed out.
Besides, China’s central government has adopted a series of measures to offset some of the impact to the economy brought by the COVID-19 outbreak and to support economic development, the association observed, adding that these are seen lending some support to domestic steel demand.
However, domestic steel output has grown quickly with the firm demand, placing great pressure on the domestic steel market, CISA warned.
China began recording year-on-year increases in crude steel output since April and positive growth has been seen during the four months since, CISA noted. Daily crude steel output still stayed at a high level of 2.99 million tonnes/day over the first ten days of August, the association estimated, based on the production record of its member steel mills.
Steel stocks held by Chinese steelmakers and traders have stayed at a high level, exerting great pressure on the domestic steel market. As of August 10, total stocks of the five major steel products comprising rebar, wire rod, HRC, CRC and medium plate at CISA’s member mills reached about 14 million tonnes, higher by a huge 46.8% from the beginning of this year. In parallel, those held by traders in the 20 cities across China checked by CISA saw an even more dramatic rise of 82% from the start of this year to top 12.4 million tonnes.
At the same time, the domestic steel market still faces some difficulties in exports as demand in overseas markets is unlikely to see any significant improvement in the near term with the on-going instability caused by the pandemic, CISA predicted.
Over January-July, China’s steel exports dropped by 17.6% on year, higher than the on-year decline of 16.5% for the first six months of 2020, while the country’s steel imports recorded a sharp increase of 49.3% on year during the same period, CISA noted.
The profits of Chinese steel mills have been seriously eroded because of the high iron ore prices, the report said. As of August 14, the price of Fe 62% imported iron ore fines had increased to $120.49/dmt CFR China, up 31.3% from the beginning of this year, while CISA’s Composite Steel Price Index slipped by 1.5% during the period, CISA observed.
Written by Nancy Zheng, zhengmm@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
Source:Mysteel Global
