MYSTEEL: Conditions ripe for China steel price to rebound
The possible recovery in Chinese steel prices is mainly supported by central government policies aimed at boosting economic growth, according to Wang, together with better steel demand against the limited increase in domestic steel output.
Last month saw the prices of major Chinese steel products hit new highs for this year before easing with the escalation of COVID-19 restrictions amid the upsurge in Omicron variant cases nationwide, he noted.
China's pandemic-induced containment measures not only caused various disruptions to steelmakers' operations and logistics, but also subdued steel demand from end-user industries.
However, with the virus resurgence being gradually brought under control, most COVID-related restrictions and lockdowns across China will be lifted this month. Accordingly, an improvement in demand from key steel-consuming sectors including auto manufacturing and machinery manufacturing is expected, Wang noted.
Moreover, Chinese steel demand in the near term will also be bolstered by the steady growth in domestic fixed asset investment, strong replenishment needs after the Labour Day holiday over April 30-May 4, and more steel exports during the current quarter, he predicted.
Another driver for a rebound in domestic steel prices this month is the introduction of more stimulus measures to boost the national economy, according to Wang. Among them, the relaxation of key property market regulations is a definite standout, he remarked.
Since early this year, both China's central and local governments have announced a succession of new policies to help stabilize the property market and to facilitate reasonable home-buying demand, Mysteel Global noted.
So far, over 100 Chinese cities have reportedly eased rules on their housing markets, ranging from lowering mortgage rates to loosening purchasing restrictions. And the issuance of more policies is expected in coming months to further stabilize the property sector – a pillar to the national economy and steel consumption.
On the supply side, Wang predicted limited on-month growth in Chinese steel output this month, mainly due to continuing COVID-related disruptions among domestic steelmakers and the meagre profit margins they'd earn on finished steel.
In his monthly market outlook, Wang also noted another on-year reduction in domestic crude steel output this year.
China's National Development and Reform Commission advised on April 19 that it hopes the domestic steel industry will continue to cut crude steel output this year, just as the government had announced last year when it mandated that production must fall below the 2020 total, as Mysteel Global reported.
Consequently, during 2021, the country's crude steel output declined by nearly 30 million tonnes on-year to 1.035 billion tonnes, as reported.
Written by Zhenqi Yang, yangzhenqi@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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