CONF: Chinese steel prices to reach year’s peak soon
Source: Mysteel
Jul 08, 2019 16:00
He expected that the zenith of the rebar price in Shanghai’s physical market would be at around Yuan 4,200-4,300/tonne ($609-624/t) including the 13% VAT.
Another senior futures investor and former steel trader, Yu Zhong, agreed that the price would peak this month. “Actually, the tipping point for fundamentals was already reached in Q2, but coincidently, a stricter round of restrictions on mills in Tangshan (North China) propped up prices. Behind the strengthening prices too was the stronger iron ore price,” he said during the panel session.
“The production curbs on (North China) mills throughout the coming autumn and winter will not be tougher than the present round of restrictions,” he added. The Tangshan government’s requirement announced in late June that over 20 steelmakers in this core steel-production base slash operations by as much as 50% for all of July is widely regarded in Chinese industry circles as amongst the toughest any local government has ever mandated, as Mysteel Global has reported.
However, Liu Haifeng, the chief of the information department of Tangshan Ganglu Iron and Steel Co, headquartered in Tangshan, warned that the market should pay more attention to steelmakers’ profits.
“Steel production is decided by steelmaker profit, not the restrictions,” he told the delegates at the conference. “(The ratio) of steelmakers’ steel scrap feeds in their blast furnaces could range from no less than 10% previously to 35% currently,” he added, indicating that high profits could stimulate mills to largely increase the ratio of steel scrap in their furnaces to offset high iron ore costs.
Tangshan Ganglu Iron and Steel Co is an integrated steelmaker with a steelmaking capacity of 6 million tonnes/year, Mysteel notes.
However, Liu still expected production in Tangshan to decrease given the low levels of profit currently, and the fact that the fervent pace of steel production over the past few years has now forced mills to conduct maintenance on their facilities.
“Mills are controlling production costs to maintain profits. Our iron ore stocks at our raw materials yards can usually satisfy our needs for seven to fifteen days and we do not stock up. If the iron ore price is too high or our profits shrink significantly, we will slow down production accordingly,” he stated.
Written by Anna Wu, wub@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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