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, in 2018, crude steel output in China amounted to 928 million mt, the highest annual level ever, increasing by 57.47 million mt or 6.6 percent compared to 2017. This high crude steel output exerts negative pressure on the steel market.
Secondly, as of January 18, the composite steel price index (CSPI) for the Chinese domestic market was at 105.76 points, down 1.27 percent compared to December 31. However, the China Iron Ore Price Index (CIOPI) as of January 18 increased to $73.65/mt, up 6.69 percent from the level on December 31. The opposing trends of import iron ore prices and finished steel prices have squeezed steelmakers’ profitability.
Thirdly, in 2018 China’s finished steel export volume totaled 69.34 million mt, indicating a declining trend for the third consecutive year. In 2019, the global economic recovery will be slow, while trade protectionism will continue to negatively affect the global steel market.
Meanwhile, as of January 18, finished steel inventory in China amounted to 11.02 million mt, increasing by 1.57 million mt compared to the end of 2018, up 16.58 percent, while rising by 1.68 million mt or by 18.05 percent on year-on-year basis. In particular, rebar and wire rod inventories increased, while inventory levels for other products were stable, indicating that market participants have built up stocks for the post-holiday period. Rebar and wire rod prices in China will likely edge up after the Chinese New Year holiday, the CISA report stated.
In conclusion, the CISA report indicated that finished steel prices in China are likely to continue to fluctuate within a limited range in the coming period.