According to a new report issued by the China Iron and Steel Association (CISA), the steel prices in May have indicated big fluctuations—indicating quick rises in the first two weeks while edging down quickly in the latter part of May.
There are a number of factors that participants in the Chinese finished steel market should pay attention to in June, the CISA stated.
First of all, inventory levels of finished steel have increased. As of June 10, the finished steel inventories of large and medium-sized steel enterprises in China amounted to 14.23 million mt, increasing by 820,000 mt or 6.1 percent compared to May 31.
Secondly, according to CISA, China’s average daily crude steel output is estimated to reach 3.21 million mt in June 1-10 period, up 0.04 percent compared to the previous period (May 21-31). The crude steel output will unlikely see rises in the future, while prices will neither indicate increases in the coming period due to the traditional off-season in summer.
Thirdly, the China Iron Ore Price Index (CIOPI) stood at $216.67/mt as of June 18, increasing by 10.04 percent compared to the end of May, while steel prices rose by 1.96 percent in the given period, far less than the growth in iron ore prices. The quick rises in iron ore prices exerted a negative impact on steel enterprises’ profitability.
As of May 1 this year, tax rebate has been removed for part of steel products, resulting in the month-on-month decline of 33.9 percent in steel export in May, signaling the obvious impact of policy. The steel exports will continue to be challenging in the future.
It is expected that China’s steel prices will fluctuate within a limited range in June due to the slack demand.