Posted on 13 Dec 2021
Chinese steel traders are being cautious about building their steel product inventories this winter, citing uncertainty about price movements and steel demand next spring, according to market sources.
With temperatures dropping and steel consumption slowing gradually, Chinese steel market attention has now turned to this year's winter stocking activity, Mysteel Global noted.
At this time of year when steel demand and prices are comparatively low amid the winter lull, Chinese traders and end-users commonly stock up some quantities of steel products in preparation for the demand revival in spring after the Chinese New Year (CNY) festive season. In 2022, the official CNY holiday will span January 31-February 6.
However, for now steel market sources are very cautious about planning their winter stock build.
A recent Mysteel poll among 562 steel industry sources found that around 20% planned to replenish their stocks this winter, whereas the vast majority - about 72% - said they had no plans. The rest were still considering.
"The market generally believes that prevailing price levels are too high to take any action. High prices mean high risks (for steel prices to fall in the spring)," a steel analyst based in Northeast China's Liaoning commented, noting the reluctance of steel traders to accumulate stocks.
A steel trader based in East China's Jiangsu agreed. "Currently, steel prices haven't fallen to the point we think will be the lowest (before CNY) because raw material prices have been declining and this will pressure steel prices to fall further," he said. "It's still too early for us to replenish," he told Mysteel Global.
As of December 8, China's HRB400E 20mm rebar price was still showing considerable resilience, rising for six consecutive working days to reach Yuan 4,847/tonne ($764.5/t) including the 13% VAT, according to Mysteel's assessment. This was Yuan 788/t higher on year.
Also, the market is expecting steel demand from the property sector to weaken in the coming year. "To us steel traders, we should at least reduce the volumes we plan for winter stocking to counter any change in such a key steel-consuming sector," the Jiangsu trader added.
In any case, Chinese steel market sources cite other factors adding uncertainties to steel price movements next year. Among those causing the most concern is the impact that the new COVID-19 variant might have on global economic recovery, and the possible increase in interest rates in the US.
Source:Mysteel Global
