Market: Slight dip seen in China’s 2019 steel demand
“It is now a commonly held view in China’s steel industry that in 2019 the country’s economy generally and the property sector specifically will be weaker than in 2018, which will have a big impact on steel supply and demand. This will surely erode mills’ margins,” said Dai Zhaoqian, director of market intelligence of Yongfeng Group, a steel mill based in East China’s Shandong province.
“What the extent of that erosion will be still needs further observation. It is natural that high profits will return to a reasonable level, but it will unlikely turn into long-standing losses. Market insiders have been too bearish recently and have overacted,” Dai told Mysteel.
Chinese steel prices have been retreating fast since the beginning of November amid deepening pessimism about demand. Mysteel’s HRB 400 20mm dia rebar benchmark in East China’s Shanghai municipality, for example, has slumped by Yuan 840/tonne ($118/t) since November 1 to reach Yuan 3,860/t including the 16% VAT as of November 28, cancelling out all the gains the price had made over the past 200 days in just a month, Mysteel noted.
Consequently, the profits that steelmakers earn on rebar production have dropped dramatically, declining from over Yuan 1,029/t to only Yuan 200/t presently and some makers are even suffering losses on their longs production now, Mysteel understands. “In recent years we’ve not seen profits drop from record highs to losses so rapidly,” Dai commented.
Dai’s statements coincided with those of Zhang Wenhai, a senior ferrous analyst with Luzheng Futures. “Though steel demand from infrastructure is expected to pick up, demand from the property market will shrink. However, the property market is the largest consumer of steel products, so in general, demand in 2019 will be lower than that of 2018,” Zhang maintained.
Despite the possible contraction of demand, nonetheless China’s steel demand is still forecast to remain at a rather high level, according to Li Xinchuang, president of China Metallurgical Industry Planning & Research Institute.
Steel demand will not fluctuate drastically in 2019, Li told delegates attending a steel conference in Beijing last weekend. Li identified supporting factors such as Beijing’s continued efforts in boosting infrastructure investment, as well as possible improvements in steel exports thanks to China’s Belt & Road initiative.
However, the steel sector still faces possible risks from the downward pressure in property investment and uncertainties triggered by the ongoing China-US trade friction. Slower growth in secondary industry as China transitions to a higher level of economic development will also indirectly drag down steel consumption, Li warned.
Written by Olivia Zhang, zhangwd@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
CSLPC: China's steel PMI falls to 46 in Dec
Jan 02, 2024 15:30
Middle East demand matrix seen changing; new steel projects to plug need gap
Dec 28, 2023 08:30
CONF: Future trends of downstream steel use in China
Dec 19, 2023 11:00
CSLPC: China's Nov steel PMI rebounds to 48.2
Nov 30, 2023 14:35
CONF: China's steel demand to dip YoY in 2023
Nov 17, 2023 18:15