CISA: China's steel prices to remain rangebound

The domestic steel market is in the traditional off season for steel consumption in winter. Meanwhile, with the Chinese New Year (CNY) holiday in early February less than two weeks away, steel demand from many users including construction firms and manufacturing industries may weaken further, the association noted.

As for steel supply, production among domestic mills remains at a relatively low level, while the tonnage has recovered somewhat this month. Over January 1-10, daily crude steel output among CISA's member steel mills averaged 2.02 million tonnes/day, increasing by 21.2% compared with that for late December, the association's data showed.

Steel inventories held by Chinese steel mills and traders have shown signs of accumulating, which may put pressure on domestic steel prices in the coming term, CISA warned.

As of January 10, total inventories of the five major steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate held by CISA's member mills were at 14.4 million tonnes, up 2.04 million tonnes or 16.5% from the end of December.

During the same period, total inventories of the five steel items in the 21 Chinese cities under CISA's regular tracking increased by 520,000 tonnes or 7.1% to reach 7.8 million tonnes, the report showed.

China's prices of major steelmaking raw materials have decreased somewhat this month except for the slight rise in prices of iron ore, which eased the market pressure from the cost side to some extent, CISA noted.

As of January 12, the prices of coking coal and metallurgical coke had fallen by 4.2% and 7.6% respectively from the end of last year, though the average price of domestically-mined iron ore concentrates had increased by 2.3% during the same period, according to the report.

However, the association suggested that more attention needs to be paid to possible extreme weather events in coming weeks, which may result in a rise in prices of coal and coke if the consumption of coal and electricity increases substantially.

Written by Nancy Zheng, zhengmm@mysteel.com

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