CONF: 2021 to see higher steel prices in China

"We are in a post-pandemic era, and with the application of vaccines, the resumption of all kinds of activities globally is likely to be seen in 2021. Meanwhile, the reform of domestic demand will drive up domestic consumption," observed Chen Xiaowen, deputy of SGIS Songshan, a Shanghai-based steelmaker. "And with the start of the China's 14th Five-Year Plan (over 2021-2025) and new 'quinquennial cycle', the country's exports, investment and consumption will see further increases. Thus, I see domestic steel demand continuing to increase too," he said.

Beginning next year, the Chinese government will begin actioning new policies relating to the scrapping of existing steel capacity and swapping it for new facilities, Chen observed, saying the new policy could cause the growth in new steel capacity to slow down. "The result of this, my view, is that steel supply and demand will be relatively tightly balanced next year. These conditions, plus the high raw materials prices, will together drive steel prices up to a high level in 2021," he commented, adding that the average price may increase by more than 5% on year. 

As of December 18, China's national price of HRB400 20mm dia rebar was Yuan 4,231/tonne ($647.7/t) including the 13% VAT, according to Mysteel's assessment, much higher than the average to date since January of Yuan 3,806/t, Mysteel Global notes.

Xie Chao, deputy general manager of Chongqing Iron & Steel, agreed that steel prices will rise. "2021 is the start of China's 14th Five-Year Plan when the country will enter a new stage for high-quality development, so from my point of view, the steel supply and demand balance might be relatively tight next year," he said, adding that the prices of flat steel products may increase more strongly than those of long products. 

Comments from most other delegates suggested that they too expect domestic steel prices to strengthen in 2021, especially in the first half year. Among the other reasons cited was the possible short-term mismatch in steel supply and demand in many other countries – not just in China – due to the faster recovery of demand, as well as the ample capital in the market as a result of quantitative easing and loosened monetary policies introduced by the governments of many countries.

As for raw materials, most delegates attending the panel discussion still held a relatively bullish view regarding the prices next year, Mysteel Global noted.

According to Mysteel's steel annual report released during the summit, steel prices are seen trending upward in 2021 and bottom prices being higher, with the domestic steel market enjoying booming demand and supply. Meanwhile, Chinese steel exports are expected to increase while domestic steel demand will also climb, with the result that steel stocks pressure will ease. Average domestic steel prices in 2021 will be higher by 7.2% from the average in 2020, the report predicted.

Written by Victoria Zou, zyongjia@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com

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