CISA: Slight volatility in steel prices to continue
“Domestic steel prices are unlikely to see a significant recovery in the short term as the capacity release remains high, though steel demand is expected to keep stable with the support of the authorities’ positive policies and measures,” CISA pointed out.
Last month, China’s average daily steel output refreshed the previous record to reach a new high of 2.92 million tonnes/day, said CISA quoting data from the country’s National Bureau of Statistics.
Steel stocks at traders’ warehouses reversed up in June, and have continued to mount so far in July, with the volume growing for the fifth straight week to reach 14.5 million tonnes as of July 12, according to CISA. This represented an increase of 480,000 tonnes or 3.4% compared with the end of June, showing the great pressure being placed on China’s steel market, the association noted.
Besides, the growth in imported iron ore prices has far overtaken that in domestic finished steel prices, bringing more challenges to steel mills, it said.
As of July 15, the price of Fe 62% imported iron ore fines had reached $116.88/dmt CFR China, marking a minor rise of 5.5% from the end of last month but higher by a huge 69.3% from the beginning of this year. During the same period, CISA’s Composite Steel Price Index (CSPI) had only increased by 0.4%, or 2.5% higher than at the beginning of the year, CISA’s data showed.
China’s steel exports have also declined with the shrinking of demand in the global market, mainly due to the slow-down in global economic growth, the increase in trade protection in international markets, and the escalation of Sino-US trade friction, CISA said in the report. Over the first half of 2019, China exported 34.4 million tonnes of steel, a decline of 2.6% compared with the same period last year.
However, over January-June, China’s GDP achieved 6.3% year-on-year growth, with the major macroeconomic indicators running within a reasonable range and laying a sound foundation for achieving Beijing’s economic growth target of 6-6.5% for this year, CISA observed. The effect of positive government policies is expected to continue in the second half year, which will help to maintain steady demand for China’s steel industry.
Many cities including Tangshan and Wu’an in North China’s Hebei province, the country’s core steel production base, have announced new rounds of production restrictions on local steel mills starting from the end-June or early-July, CISA noted.
The production of steel among mills which fail to meet the extremely low emission standards is likely to be restricted if the environmental curbs are strictly enforced. This may help to ease the pressure in supply and benefit the supply-demand balance in domestic steel market, CISA said.
Written by Nancy Zheng, zhengmm@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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