Posted on 13 Jul 2021
China’s steel prices will be more reflecting its fundamentals in the second half of 2021, with possible moderate fluctuations in the third quarter and then softening in the fourth quarter in the context that steel demand will slow down in the growth and production costs will ease on higher supplies in raw materials, Mysteel’s research centre shared its outlook for the remainder of 2021.
For the latter half of 2021, “Global commodities prices will gradually return to the normal range, reflecting the true fundamentals, as monetary policy will be tightened globally on the economic recovery and growing concern on inflation,” the research centre projected.
“For China, steel demand will gradually ebb, as the pressure on economic growth is moderate, financial aids in infrastructure will reduce, and surveillance over the domestic property market will be tightened,” it stated, adding, “steel production costs may be reducing in the context of lower stee output for carbon emission reduction in the steel sector and added raw material supplies.”
For the third quarter, the curbing on steel output in China may result in temporary rebounds in steel prices, but the close scrutiny of the related authorities will most likely lead to fluctuation, and the prices may soften with the tightening in capital flow, the centre shared.
For the rest of 2021, the world’s service industry will recover faster with the progress in vaccination globally, while demand for durable goods will ebb, and in turn demand for bulk commodities may ease too, and China will most likely easily achieve the 6% on-year GDP growth for 2021, a rather conservative target, without relying much on the infrastructure construction anymore.
As for China’s steel-consuming sectors, the picture will be mixed in that the control over China’s property market has already been tightened in the aspects of bank loans and government policies, home appliance manufacturers may have less demand for steel as H2 tends to be a low production season, and engineering machinery sales may subside on year in line with the slow-down in construction, the centre analyzed.
On the other hand, the country’s auto production may pick up the pace in Q4 with the improvement in auto chips supplies though the shortage may continue until early 2022, and new ship orders may grow at a high speed for H2, or seeing a 110% on-year growth in new orders for the whole 2021, it added.
For the first half of 2021, China’s apparent demand for the five major steel products including rebar, wire rod, hot-rolled and cold-rolled coils and plates soared, approximating 11.3 million tonnes, while supply of such products amounted to 10.7 million tonnes, with the gap being filled up with inventories, the centre noted.
To realise lower steel output for 2021, China will need to bring down its daily steel output nationwide by 280,000 tonnes/day, which will only be achievable with the other provinces joining Tangshan in restricting local production, the centre calculated, adding that the move by Tangshan alone since late March affected daily output by about 100,000 t/d. So far, Gansu and Anhui have already proposed their production cut plans, as reported.
In January-May, China’s steel output grew 13.9% or 61.4 million tonnes on year to 473 million tonnes, according to the official data.
Source:Mysteel Global
