Posted on 04 Mar 2022
Price trends in China's domestic steel market throughout the rest of this year are difficult to predict, with uncertainties about the country's internal economic and industrial policies being exacerbated by external geopolitical tensions and mounting concerns about energy supplies and oil prices.
This is the conclusion Mysteel Global draws from responses to a recent domestic steel industry questionnaire and from comments by speakers and delegates at Mysteel's 2022 annual conference held in Shanghai late last week.
A highlight of the conference's final day on Saturday was Mysteel's tabling of the results of a questionnaire drawing upon responses from 5,485 industry participants across in China of whom 43% believed that average domestic steel prices of this year would rise by 5% or more, compared with 2021. This compares with 25% who maintained that prices would decline by over 5% on year (see graph below).
Those participating in the survey included representatives of mining enterprises, steel mills, trading companies, investment and research institutions and steel end-users.
In the survey's sample, 32% of those responding believed that domestic steel-price fluctuations would be within 5% - either upward and downward.
Market opinions on China's steel price trend 2021 VS 2022
Source: Mysteel's survey
The survey results suggested that only slightly more industry insiders expected further price growth this year than those fearing a price retreat - an outcome mirrored by comments made by panelists in an open discussion at the Shanghai conference. Indeed, the variance in views expressed this year was in marked contrast to the consensus at last year's annual conference when all participants were broadly optimistic about prices in 2021, noted Ren Zhuqian, Mysteel's vice president and host of the panel discussion.
"I am rather pessimistic this year and the core of this year's (price movement) lies in the property sector," panelist Bin Yixiang, chairman of Ningbo Yixiang Industrial Co, a ferrous trading company, commented. The property sector is China's largest steel consuming sector, Mysteel Global notes.
Following its poor performance during 2021, China's property sales remained "very bad" in January-February, Bin lamented.
"Building contractors for infrastructure projects and real estate development are suffering from serious cash constraints, especially the property developers," Bin observed. "They are almost 'lying flat' (and are doing nothing)," he said, describing the reluctance of property developers to purchase new land and launch new projects due to a lack of liquidity.
Bin believed that Chinese rebar prices may have already reached their peak for this year back in February when they touched just above Yuan 5,000/tonne ($792/t). From here on, the price may fall to below Yuan 3,600-3,700/t at their lowest point, and steel producers may lose money for a rather long period of time this year, he warned.
Yuan Wenjiong, general manager of bulk commodity trader Zhejiang Materials Industry Dao Fortune Co, agreed that "it is very difficult to predict price developments this year". Whether the central government will issue more measures to rescue the property sector and whether more curbs on steel output will be imposed by Beijing, as was the case last year, remain very unclear.
Moreover, the ongoing tension over Russia's invasion of Ukraine is adding more uncertainties to the market as the tensions may lead prices of steel raw materials such as iron ore and of finished steel to fluctuate wildly, Yuan said.
However, Guo Xinwen, deputy general manager of Shougang Changzhi Iron & Steel Co, was rather optimistic, believing that steel prices will climb further this year given the robustness of raw materials markets.
"It is really not us (steel mills) who can decide the steel prices," when all raw materials remain high, he stressed.
Guo told delegates that for imported iron ore prices to fall below $120/t seems hard to imagine, while coking coal prices may have further room to grow - given that Chinese mills' coal imports from Russia and Ukraine are going to be affected by the conflicts there.
On the condition that mills can still maintain a reasonable level of profits, based on the high raw material prices, he reckoned that rebar prices were likely to move in the range of Yuan 4,800-5,200/t this year.
Source:Mysteel Global
