According to a new report issued by the China Iron and Steel Association (CISA), there are three factors that participants in the finished steel market should pay attention to in the coming period.
First of all, production cuts have been implemented in the winter season, which will continue to affect market participants’ expectations for finished steel prices in the future period. The average daily output of crude steel in China in November was 2.205 million mt, down 5.5 percent month on month. It is expected that the average daily output of crude steel in December will decline further, which will likely exert a positive impact on finished steel prices.
Secondly, as of December 14, import iron ore prices for China stood at $66.23/mt, up 13.78 percent compared to the end of October. However, the composite steel price index (CSPI) for the Chinese domestic market in the given period only rose by 8.9 percent, far lower than the growth of iron ore prices. Meanwhile, prices of coke, coking coal and scrap will likely rise further in December, negatively impacting steelmakers.
Thirdly, finished steel prices in the Chinese domestic market are at more attractive levels than in the international market, which will curb Chinese finished steel exports.
With weather becoming colder in China, construction sites will halt their activities, which will drag down domestic demand for finished steel. Considering that finished steel output will be lower due to production cuts in the winter season, both supply and demand will be weak but in equilibrium. It is thought that finished steel prices in the Chinese domestic market will likely move on a fluctuating trend in the coming period, the CISA stated.