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 June, the average daily output of crude steel in China amounted to 2.6733 million mt, surging to its highest historical level, up 8.9 percent year on year. The increased output exerts negative pressure on the steel market.
Secondly, metallurgical coke prices in China increased by a total of RMB 509/mt ($76.2/mt) in the two months up to the end of June, while scrap prices rose by RMB 183/mt ($27.4/mt) in the three months up to the end of June, with these increases exerting a negative impact on steelmakers’ profitability.
Thirdly, in the first six months of the current year China’s finished steel export volume amounted to 35.426 million mt, down 13.2 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 July 13, finished steel inventory in China dropped to 9.88 million mt, down by 8.01 million mt or 44.52 percent compared to the end of March, while increasing by 2.43 million mt or 30.58 percent compared to the beginning of this year, and up 0.75 million mt or 8.09 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.
The CISA report also said that China will continue supply-side reform 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.