According to a new report issued by the China Iron and Steel Association (CISA), steel prices in December moved up, supported by surging iron ore prices. There are a number of factors that participants in the Chinese finished steel market should pay attention to in January, the CISA stated.
First of all, inventory levels of finished steel decreased in December, but have started to increase in January. As of December 31 last year, overall domestic inventories of the five main finished steel products in 20 major cities in China totaled 7.3 million mt, up 10,000 mt or 0.1 percent compared to mid-December, while as of December 20 overall domestic inventories of the five main finished steel products in the 20 cities totaled 7.29 million mt, down 4.1 percent compared to December 10. However, as of January 10 this year, overall domestic inventories of the five main finished steel products in the cities in question totaled 7.71 million mt, up 410,000 mt or 5.6 percent compared to December 31. The rising inventory will likely exert a negative impact on steel prices in the future.
Secondly, according to the National Bureau of Statistics (NBS), China’s crude steel and finished steel outputs totaled 91.25 million mt and 120.34 million mt in December, up 7.7 percent and 12.8 percent, respectively, with the increasing outputs likely to negatively affect the steel market.
Thirdly, the China Iron Ore Price Index (CIOPI) stood at $169.34/mt as of January 15 this year, increasing by 6.41 percent compared to December 31, while steel prices declined by 0.76 percent in the given period, which will negatively affect steel enterprises’ profitability.
In January, demand for steel will slacken amid the cold weather, the approach of the Chinese New Year holiday and the worsening Covid-19 pandemic in northern China, which will result in declines in steel prices, though stock replenishment ahead of the long holiday will likely provide support for steel prices.
Moreover, the Covid-19 pandemic has not been curbed effectively in overseas markets, which will exert a negative impact on the global economic recovery.