According to a new report issued by the China Iron and Steel Association (CISA), there are three factors that participants in the Chinese finished steel market should pay attention to in the coming period.
First of all, in May, the average daily output of crude steel in China amounted to 2.6171 million mt, surging to its highest historical level. The increased output exerts negative pressure on the steel market.
Secondly, in May, China's pig iron output only increased by 3.78 million mt, while the country's iron ore imports rose by 11.22 million mt, both month on month. At the same time, iron ore inventories at Chinese ports have been at high levels, indicating that the oversupply in the iron ore market will continue.
Thirdly, in the first five months of the current year China’s finished steel export volume amounted to 28.493 million mt of finished steel, down 16.3 percent year on year, continuing its declining trend. Meanwhile, the escalation of trade tensions between the US and China will negatively affect China's exports.
Meanwhile, as of June 8, finished steel inventory in China dropped to 10.37 million mt, down by 7.62 million mt or 42.36 percent compared to the end of March, while increasing by 2.43 million mt compared to the beginning of this year, up 30.58 percent, and up 0.24 million mt or 2.39 percent compared to the same date last year. The ongoing decreases in inventories of finished steel in China will ease the downward pressure on the steel market.
Currently, China is implementing strict environmental protection measures in its steel industry, which will have a positive impact on the steel market. However, the Chinese domestic steel market will continue to be characterized by oversupply. It is thought that finished steel prices in China are unlikely to indicate big increases in the coming period, but will move on a fluctuating trend instead.