Posted on 21 Jan 2021
China’s domestic steel prices are likely to retreat in the coming term as demand from end-users may shrink, according to the latest monthly report of the China Iron & Steel Association (CISA) published on January 19. CISA noted that the cold winter temperatures in many regions of China make this season the off-season for steel consumption, but added that enhanced measures to control the spread of COVID-19 would also affect demand.
Chinese steel demand is expected to remain stable overall in 2021 thanks to the steady recovery of the country’s economy. The central government will continue to implement proactive fiscal policies and prudent monetary policies to keep the economy performing within a reasonable range, CISA pointed out.
However, in the short term, domestic demand has shrunk due to the lower temperatures and high steel prices. Steel stocks of the five major steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate held by both mills and traders have shown signs of accumulation this month, according to CISA’s survey.
As of January 10, total inventories of the five held by traders in the 20 major cities under CISA’s survey had increased to 7.7 million tonnes, up 5.6% from the end of December, while those held by CISA’s member mills witnessed larger growth of 12.1% during the same period to top 13 million tonnes, the survey data showed.
China’s steel production has stayed high of late, placing some pressure on the balance between supply and demand. Last month, daily crude output averaged 2.94 million tonnes/day, growing by 0.8% on month or up 7.7% on year, CISA said, quoting data from the country’s National Bureau of Statistics.
Domestic steel prices posted substantial growth last December, driven by the sharp rise in raw material prices including those of imported iron ore, metallurgical coke and scrap. However, Chinese mills’ profit margins have been under pressure due to the higher raw material costs as well, CISA noted.
As of January 15, the price of Fe 62% imported iron ore fines was assessed at $169.34/dmt CFR China, up 6.4% from the end of December, while during that period, steel prices had actually decreased by 0.8%, according to the association’s release.
In parallel, China’s steel exports still face many difficulties in the complex and grim international market, as the on-going battle against the COVID-19 and lower-than-expected vaccinations may affect the global economic recovery, CISA warned.
Source:Mysteel Global
