According to a new report issued by the China Iron and Steel Association (CISA), despite the effective control of Covid-19 and the acceleration of downstream industries’ resumption of production and construction activities, steel prices in China are unlikely to indicate significant rises in the coming month. 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 June 20, finished steel inventory in China amounted to 14.62 million mt, decreasing by 4.44 million mt or 23.3 percent compared to the highest level in March. Though inventory in the finished steel market decreased from the high levels in March, it has increased as of June 20 compared to June 10 due to rainy weather and floods in many regions of China.
Secondly, in the June 11-20 period of the year, the average daily crude steel output of CISA-member steelmakers in China amounted to 2.1423 million mt, up 1.57 percent compared to June 1-10. Against the increasing crude steel output, demand from downstream users has not recovered completely, which will negatively affect the steel industry.
Thirdly, the China Iron Ore Price Index (CIOPI) stood at $102.52/mt as of June 12, increasing by 3.61 percent compared to May 31. The high levels of import iron ore prices will exert a negative impact on Chinese steel enterprises’ profitability.
An economic forecast report issued by the Organization for Economic Co-operation and Development on June 10 predicted that the global economy will shrink by six percent in 2020, which will result in reduced demand for steel in the international market and will also decrease the imports of finished steel from China.
Finished steel prices in China are unlikely to continue their rising trend due to the approaching traditional offseason, the CISA predicts.