Posted on 26 Jul 2021
Chinese domestic steel prices are expected to fluctuate in near term with the changes in fundamentals as both supply and demand may slow, according to the monthly release of the China Iron & Steel Association (CISA) on July 21.
“The domestic steel industry is under pressure to cut production, while demand from downstream steel-consuming industries is likely to weaken too,” the association pointed out in the report.
China has entered the traditional off season for steel consumption in summer when road freight and work on building sites outdoors and are hampered by heavy rainfalls and high temperatures.
In the medium term, steel demand is unlikely to grow at a fast pace given the cooling of the real estate sector, the shortage of automotive-use semiconductors and the coming low season for home appliance production.
CISA’s data showed that stocks of the five major steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate in warehouses in China’s 20 major cities have been mounting continuously since the start of June and as of July 10 had reached 11.7 million tonnes. The total was higher by a huge 4.4 million tonnes or 59.7% from the beginning of this year, indicating the great pressure to destock.
However, domestic steel prices are unlikely to fall sharply amid intensified market expectations for a steeper reduction in supply over the remainder of 2021, CISA said, referring to Beijing’s target to lower steel output this year.
Last month, daily crude steel production moved down on month for the second month, dipping by another 2.5% from May to average 3.12 million tonnes/day, CISA said quoting data from the country’s National Bureau of Statistics (NBS). Nonetheless, output remained at a very high level, it noted.
Domestic steel mills also face more pressure in controlling their production costs as prices of imported iron ore have been hovering high. As of July 16, CISA’s China Iron Ore Price Index (CIOPI) assessed the imported iron ore price at $219.63/dmt CFR China, posting dramatic growth of 109% on year, and much higher than the on-year growth of 44.4% in steel prices.
At the same time, CISA warned that China’s steel exports may face great challenges with the recovery in steel supply overseas and though the impact of China’s decision to cancel the tax rebates on some steel exports starting from May 1, the association warned.
Data from the World Steel Association (WSA) quoted by CISA showed that the world’s total crude steel output outside China had surged by 32.9% on year in May, easing the supply tightness in the global steel market.
Source:Mysteel Global
