Posted on 23 Aug 2021
Chinese domestic steel prices are expected to stay rangebound over the near term with the slowdown in demand and lower output, according to the monthly release of the China Iron & Steel Association (CISA) on August 19.
Domestic steel demand may weaken due to the slowing domestic economy and the increasing challenges faced internationally, CISA pointed out.
The growth in China’s major steel-consuming industries has eased with the impact of the coronavirus’s resurgence in parts of the country and the severe floods elsewhere, but the demand continued the trend of steady recovery overall, according to the association.
Domestic steel prices are unlikely to see a sharp fall, given market expectations for stricter production curbs during the remainder of 2021 to meet Beijing’s target of lower steel output this year.
Last month, China’s crude steel output totalled 86.8 million tonnes, down 8.4% on year, with the daily production was down 10.5% on month to average 2.8 million tonnes/day, CISA said, quoting data from the country’s National Bureau of Statistics (NBS).
Statistics from China’s General Administration of Customs showed that China’s steel exports totalled 5.67 million tonnes in July, down 12.2% on month, due to the removal of tax rebates on finished steel shipping abroad.
“Steel supply and demand were basically kept in balance as the slowing demand and falling exports offset some impact of the significant decrease in production,” CISA noted.
For the remaining five months of 2021, the decrease in domestic crude steel output is expected to expand with the government’s reiteration on production cuts, which may lend some support to domestic steel prices, the association noted.
“A new equilibrium between supply and demand will emerge with the decrease in both sides,” CISA warned. It suggested Chinese steel mills analyse the market changes and actively adjust their product structure to maintain the stability of the domestic steel market.
Meanwhile, the higher prices of coking coal and coke are placing domestic steel mills under great pressure to reduce their production costs. As of August 13, the average price of coking coal was at Yuan 2,635/tonne ($406/t), up 11.9% on month, while that of coke had increased by 10.6% on month to Yuan 2,848/t, according to the association. Yet over the same period, steel prices decreased by 0.5%, it noted.
Source:Mysteel Global
