China’s flat steel under more pressure than long steel
The dampened demand for flat steel saw China’s national price of 4.75mm hot-rolled (HRC) coil decreased Yuan 51/tonne on week to Yuan 3,488/t as of March 24, being Yuan 153/t lower than the national average HRB400 20mm rebar benchmark price, compared with the minus Yuan 5/t price difference on January 23.
Chart- Price difference of rebar and HRC over Jan 2-Mar 24 Unit: Yuan/t
For example, “flat steel consumption in the auto industry has been seriously constrained so far with the persistent weakness in domestic auto industry, and it is getting worse with many global carmakers having been forced to suspend operations,” said an analyst from Shanghai-based Soochow Futures.
China’s auto sales and production over January-February slumped dramatically on year, with the sales down 42% and production down 45.8%, and for the first quarter, China’s auto production and sales are forecast to slump 45% on year, though the decline may narrow to 25% on year for the first half of 2020, as reported.
“With the deteriorating situation of
the COVID-19 elsewhere in the world, many carmakers have halted their manufacturing
plants one after another, posing a threat to further reduction in demand for flat
steel,” said the Soochow analyst.
As of now, automakers such as Ford,
Toyota, Citroen, Volkswagen and Opel, Tesla, and Peugeot have
all announced to suspend their production in Europe and the U.S. amid the
COVID-19 pandemic, according to company releases.
“Sales are poor and margins are really thin,
(so) we have to halt one of our blast furnaces for maintenance for a while,” an
official from a flat steel producer in Tangshan, North China’s Hebei admitted.
In contrast, China’s demand for long steel products, especially those
for construction, has been steadily recovering together with the gradual resumption
of construction projects across China since late February.
“Though the recovery of long steel
demand is not as fast as expected in March, I believe the pace will catch up in
April,” the Shanghai analyst added.
As of March 20, nearly 90% of the
11,000 key construction projects in China had resumed construction, among all
railway projects, 97% of road or waterway projects, 87% of airport and 86% of
water conservation projects had all been back online, according to a March 21
report of the Joint Prevention and Control Mechanism of the State Council, a
governing body established just to coordinate and allocate resources to help
with the construction project.
Mysteel’s survey on daily long steel
trading also reflected a consistent trend of recovery, as the daily trading of
construction steel consisting of rebar, wire rod and bar-in-coil among 237
traders across China have sustained at above 100,000 tonnes/day since the
beginning of March and also hit a nearly four-month high of 225,603 t/d on
March 16.
Written by Olivia Zhang, zhangwd@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com
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