Posted on 27 May 2021
Chinese domestic steel prices are likely to stabilize in the coming term after this month’s fluctuations, following the central government’s stern warning about soaring bulk commodity prices, according to the monthly release by the China Iron & Steel Association (CISA) on May 21.
Domestic steel prices saw a dramatic rise after the Labour Day holiday over May 1-5, driven by the strong bulk commodity prices in the global market, the easing of global liquidity and higher market expectations for a steel demand recovery. However, the prices retreated fast from around mid-May as market sentiment cooled and following the government’s warning about runaway commodity prices.
At the State Council's executive meeting on May 19, Chinese Premier Li Keqiang called for a guarantee for bulk commodities supplies and an end to “irrational” gains in prices in order to keep the economy running smoothly.
In its release last Friday, CISA noted that “domestic steel prices are unlikely to continue their sharp growth as there has been no substantial change between steel supply and demand”.
Steel demand is expected to weaken in the coming term as construction in southern China will slow soon with the arrival of the rainy season there. At the same time, automobile output may decrease due to the shortage of automotive-use semiconductors, CISA noted, while household appliance manufacturing will enter the slack season for production. All these factors indicate a reduction in steel consumption, it said.
Stocks of the five major steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate at China’s 20 major cities posted an on-year fall of 16.6% to 12.5 million tonnes as of May 10, the association noted, thanks to the firm demand from end-users. On the other hand, the volume held by CISA’s member mills was still 0.2% higher on year due to their high steel output.
In April, China produced 97.9 million tonnes of crude steel, up 13.4% on year, with the daily output hitting a new high of 3.26 million tonnes/day on average last month, higher by another 7.5% on month, the association said, quoting data from the country’s National Bureau of Statistics (NBS)
Domestic steel mills still face great pressure in controlling their production costs, given the high-level of imported iron ore prices. As of May 19, the price of 62% Fe iron ore was at $211.05/t, still up 32.3% on year.
China has adjusted the trade taxes on some ferrous products and cancelled the export tax rebates of most steel products to restrict exports of primary steel and encourage imports. The impact of the policies will emerge gradually in the coming term, CISA pointed out.
Source:Mysteel Global
