Posted on 02 Feb 2021
Chinese domestic steel prices may fluctuate within a narrow range this month as spot trading activity has quietened further towards the Chinese New Year (CNY) holiday starting February 11, according to the near-term market outlook from Wang Jianhua, Mysteel’s chief analyst. But market optimism is still lending some support to prices, he observed.
In February, steel demand in many regions across China will generally be at a standstill, and prices may not vary to any great extent amid the holiday mood, Wang stated, as market participants won’t adjust prices very actively given the trading weakness.
But concerns remain, chief among being that the steel market this month might feel pressure from production and stocks. He expected that crude steel and finished steel production for February would increase by 7.6 million and 16 million tonnes on year respectively, and that finished steel production over 2021’s first two months might see an on-year rise of 27.5 million tonnes.
“The stocks pressure may ease from 2020, but it will still be substantial compared to prior years,” according to Wang, who also expects that by the second week after the CNY holiday, the total stocks among both traders and mills could reach 34.9-36.9 million tonnes, lower on year but some 4-6 million tonnes higher than in the second week after CNY 2020 (which began on January 24 last year).
Inventories this year would peak in early- or mid-March at 35-37 million tonnes, according to the outlook, slightly less than the stocks peak for 2020 of 38.9 million tonnes, touched in mid-March 2020.
By the last week of January, the stocks of the five finished steel items held by traders in 35 cities and among 184 steelmakers surveyed regularly by Mysteel totalled 17.9 million tonnes, making for the fifth weekly climb, with the pace of on-week growth steadily accelerating over the five weeks, the survey results show.
“This year, the traders’ enthusiasm for accumulating inventory before CNY has proven weaker than last year,” Wang maintained. “Overall, large-sized trading companies stocked up more than small traders, and among the large ones, some only procured according to the contracts they had signed with steelmakers and refused to buy more,” he said.
However, expectations for future demand after the holiday break remain positive. “Those traders and end-users who have not replenished stocks will have to undertake procurement after the holiday,” Wang said.
He noted too that as the central government is encouraging people to avoid travelling this CNY (to help contain the spread of the virus), construction workers may avoid returning home this CNY and instead, spend the holiday at their quarters on or near building sites, meaning that once the break is over the pace of construction will accelerate more quickly. “The steel stocks may decline earlier and faster,” he suggested. Some contractors may even continue working on projects without a pause this year, Mysteel has found.
Among some 116 construction companies Mysteel has surveyed nationwide, some 76 or 65.5% said they had not halted work in advance of the holidays this year while the remaining 40 – accounting for 34.5% – had suspended work earlier. More tellingly according to Wang, Mysteel found that work on some 533 construction projects would continue normally over the holiday, some 52.7% more than had stayed on the job during last year’s CNY. He predicted that demand for the five major finished steel items would increase by 12 million tonnes on year this year.
Source:Mysteel Global
