According to a new report issued by the China Iron and Steel Association (CISA), there are a number of factors that participants in the Chinese finished steel market should pay attention to in the coming period.
First of all, inventory levels of finished steel increased in June. As of the end of the June, finished steel inventory in China amounted to 14.01 million mt, up 530,000 mt or 3.94 percent compared to the end of May. As of July 12, inventory of finished steel totaled 14.48 million mt, up 470,000 mt or 3.42 percent compared to the end of June. The rises in finished steel inventory will exert a negative impact on finished steel prices in the future.
Secondly, in June, the average daily crude steel output in China amounted to 2.9177 million mt, reaching a new historical high. The CISA considers that the rises in crude steel output will negatively affect the finished steel market and urges steelmakers to implement production cut measures.
Thirdly, the China Iron Ore Price Index (CIOPI) stood at $116.88/mt as of July 15, up 69.32 percent from the beginning of the year, while rising by 5.5 percent month on month. As of the same date, the composite steel price index (CSPI) was only up 0.36 percent month on month, while rising by just 2.54 percent since the start of the year. The far more rapid rises in import iron ore prices have negatively affected the performances of steelmakers.
Fourthly, China exported 34.40 million mt of finished steel in the first half of this year, down 2.6 percent year on year. The CISA has advised Chinese steelmakers to analyze the demand situation in the international market, improve product quality and maintain their export competitiveness.
The CISA indicated in its report that demand for finished steel will likely remain stable in the near future, while finished steel prices in China will continue to fluctuate within a limited range in August against the backdrop of high crude steel output levels.