According to a new report issued by the China Iron and Steel Association (CISA), there are a number of factors that participants in the Chinese finished steel market should pay attention to in the coming period.
First of all, inventory levels of finished steel increased in December, shifting from the sharp decreases recorded in November. As of the end of December, finished steel inventory in China amounted to 10.05 million mt against 8.91 million mt in late November which was reported by the CISA a month ago. The increases in finished steel inventory reflect market players’ better expectations as regards the future prospects for the finished steel market.
Secondly, in December, the average daily crude steel output in China amounted to 2.718 million mt, up 1.6 percent compared to November and up 10.7 percent compared to the same month of the previous year, signaling strong pressure from the supply side. Accordingly, the CISA has urged domestic steelmakers to adjust their industrial structure, reasonably control the impulse to expand production, and contribute to the smooth operation of the steel market.
Thirdly, the China Iron Ore Price Index (CIOPI) stood at $93.97/mt as of January 17, up 3.81 percent compared to the beginning of 2020, while up 27.59 percent year on year. As of the same date, the composite steel price index (CSPI) was down 0.26 percent year on year. The import iron ore prices have moved up while finished steel prices have edged down, negatively affecting steel enterprises’ profitability.
In 2019, China exported 64.293 million mt of finished steel, down 7.3 percent year on year, which was the fourth consecutive year of year-on-year decreases. Currently, US-China trade frictions have eased temporarily, which will exert a positive impact on steel exports in 2020.
In this overall context, the CISA indicated in its report that demand will slacken in the coming period amid the Chinese New Year holiday, while the steel output is unlikely to rise. Accordingly, finished steel prices in China will fluctuate within a limited range in early February, the CISA predicts.