Chinese steel prices are expected to remain rangebound for the foreseeable future as the recent torrential rains and floods are causing domestic demand to weaken, according to the monthly report of the China Iron & Steel Association (CISA). At the same time, the fire of COVID-19 is still raging abroad, hampering Chinese steel exports, it warned.
At home, the domestic steel market may face the pressure of oversupply due to the fast growth in steel production, CISA noted, while consumption shrinks as a consequence of the floods in South China and high temperatures in most other regions.
China produced 499 million tonnes of crude steel over the first half of this year, higher by 1.4% on year, CISA said, quoting data from the country’s National Bureau of Statistics. Daily crude steel output still stayed at a high level of 2.98 million tonnes/day over the first ten days of July, the association estimated, based on the production record of its member steel mills.
But the robust steel production has applied enormous pressure to the domestic steel market, and steel stocks held by both steelmakers and traders have shown signs of accumulating recently, CISA pointed out.
As of July 10, total stocks of the five major steel products comprising rebar, wire rod, HRC, CRC and medium plate at CISA’s member mills reached 13.6 million tonnes, higher by a huge 42.8% from the beginning of this year. In parallel, those held by traders in the 20 cities across China checked by CISA witnessed an even more dramatic rise, leaping by 83.1% from the start of this year to top 12.5 million tonnes.
Chinese steel mills’ profits have been seriously eroded because of the deviation in prices of steelmaking raw materials and finished steel, the report noted. As of July 16, the price of Fe 62% imported iron ore fines was at to $109.72/dmt CFR China, up 21.2% from the beginning of this year, while CISA’s Composite Steel Price Index decreased by 1.7% during the period, CISA observed.
China’s steel exports still face considerable difficulties because demand from overseas buyers remains lacklustre. The impact of COVID-19 on the global economy has proven far more devastating than predicted, CISA acknowledged. The pandemic in the United States has yet to reach an inflection point while the virus in other countries and regions is still very severe, the association observed, saying neither was conductive to helping China’s steel export business.