According to a new report issued by the China Iron and Steel Association (CISA), following the acceleration of downstream industries’ resumption of production and construction, the demand for steel will improve further and steel prices will likely see a slight rising trend. There are a number of factors that participants in the Chinese finished steel market should pay attention to in the coming period, the CISA stated.
First of all, inventory levels of finished steel have decreased. As of May 10, finished steel inventory in China amounted to 14.98 million mt, decreasing by 1.26 million mt or 7.8 percent compared to April 30, while declining by 25.88 million mt or 5.23 percent compared to March 10, which was the highest level this year. Though the inventory in the finished steel market decreased, it has still been at relatively high levels, while the continuing decreasing inventory will exert a positive impact on steel prices.
Secondly, in the May 1-10 period of the year, the average daily crude steel output of CISA-member steelmakers in China amounted to 2.0517 million mt, lower than the average level in April and the same period of last year, while still was at high level. Due to the ongoing coronavirus pandemic worldwide, a global recession will be inevitable, which will negatively affect the whole supply chain of steel industry.
Thirdly, the China Iron Ore Price Index (CIOPI) stood at $91.25/mt as of May 15, increasing by 10.59 percent compared to recorded on April 30. As of the same date, the composite steel price index (CSPI) was up 2.18 percent compared to the end of April, 8.41 percentage points lower than the rise seen in import iron ore prices. The continuous rising import iron ore prices will exert a negative impact on steel enterprises’ profitability.
The United Nations issued a report of World Economic Situation and Outlook on May 13, forecasting the world economy will shrink by 3.2 percent in the year of 2020, which will be the most severe economic contraction since 1930s, indicating the demand for steel in the global market will be lower and not good for the exports of steel in the future.
Finished steel prices in China will likely see a rising trend in June amid smooth release of demand, the CISA predicts.