CISA: China’s steel prices to face pressure amid weaker demand from late Oct

Thursday, 22 October 2020 17:46:31 (GMT+3)   |   Shanghai

According to a new report issued by the China Iron and Steel Association (CISA), stable demand for steel in September exerted a positive impact on steel prices in China, while the rapid release of capacity negatively affected steel prices, restricting price increase margins. From late October, demand will likely begin to decline, putting pressure on prices. There are a number of factors that participants in the Chinese finished steel market should pay attention to, the CISA stated.

First of all, inventory levels of finished steel have decreased. As of September 30, finished steel inventory in China amounted to 11.5961 million mt, decreasing by 1.8087 million mt or 13.49 percent compared to September 20, while rising by 2.0637 million mt or 21.65 percent compared to the beginning of the year. However, due to the long National Day holiday, as of October 10, finished steel inventory in China amounted to 13.59 million mt, increasing by 2.0 million mt or 17.22 percent compared to September 30.

Secondly, according to the National Bureau of Statistics (NBS), in September this year, the average daily crude steel output of all steelmakers in China amounted to 3.0853 million mt, up 0.5 percent month on month, contributing to the oversupply situation in the steel market.

Thirdly, the China Iron Ore Price Index (CIOPI) stood at $118.43/mt as of October 16, increasing by 30.83 percent compared to the beginning of the year, while the China Steel Price Index (CSPI) only increased by 0.85 percent during the given period. The faster rise in iron ore prices compared to that for steel prices continued to negatively affect steel enterprises’ profitability.

The Covid-19 pandemic worldwide has worsened, which will not be good for China’s steel exports. For instance, according to the latest report issued by the International Monetary Fund (IMF), it is forecast that major economies except for China in 2020 will see a shrinking trend. Accordingly, the World Iron and Steel Association has predicted that demand for steel in the global market (except for China) will shrink by 13.3 percent in 2020, signaling a difficult situation for China’s steel exports.

October will be another month in the traditional peak season for steel demand in China, while with the weather becoming colder and colder, demand will slacken in late October. Accordingly, the CISA forecasts that steel prices in October are unlikely to record big rises but will fluctuate within a limited range. 

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