China Nov steel prices to lean on fundamentals
Posted on 05 November 2021
In November, China's domestic steel prices will be more reflecting its own fundamentals and may stand chances for rebounds after having declined for most of October following the thermal coal price, Wang Jianhua, Mysteel's chief analyst, shared his monthly outlook.
This month, the impact of coal-related commodities prices on ferrous commodities including steel will be waning, Wang shared, as the country's thermal coal supply tightness has been eased substantially and speculation in the market, thus, has been dampened, enabling the market to return to its normal track.
"After the serious correction in the series of ferrous futures on the drag of coal-related commodities, China's steel market sentiment may turn for the better on the continuing depletion of steel inventories in November, and prices may bottom out," Wang said.
China's steel market fundamentals may be supportive for price recovery too, as supply will still be curtailed with Beijing's determination for lower steel output on year for 2021 and lower power consumption and intensity among power-intensive enterprises, according to him.
"To achieve, an annual cut of 20 million tonnes in steel output from 2020, China will need to reduce output on year by 35.8 million tonnes, which means that many local authorities need to take action now," he projected, explaining that Beijing will probably review the progress on local steel production reduction starting November.
Besides, winter restrictions on steel mills in North China will kick off in November too, the start of the central heating services until March 2022.
Tangshan, China's top steel production base in North China, has already intensified its efforts in further trimming local steel output towards the end of October, which is estimated to cut another 70,000 tonnes/day of steel production, he noted, adding that some other Chinese mills have been voluntarily rein in their production due to lossmaking with recent steel price declines while high production costs.
In October, China's HRB400 20mm dia rebar price, a key reference to China's steel market, plunged after having touched a five-month high of Yuan 6,039/tonne ($943.6/t) on October 9, ending the month at Yuan 5,361/t, or down Yuan 564/t on month, and ratio of profitable mills fell to below 70% by October end from around 78% in November, according to Mysteel's survey across 63 mills across China.
As for demand, steel consumption in China's property sector may shrink further while the domestic infrastructure sector may improve modestly as some projects may need to be completed by the yearend, and the country's manufacturing sector may consume more steel too, though auto and white goods manufacturing may decrease further in November, he added.
Last month, China's steel consumption with longs in particular had been much lower than expected partly due to the price volatility, power rationing on power-intensive enterprises with some manufacturers affected, and uncertainties in production and national economy such as the property market, Wang shared on a few occasions.Source : Mysteel Global