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, the production cuts and elimination of low-grade construction steel have exerted a positive impact on the Chinese finished steel market, while the balanced situation of supply and demand in steel market is still fragile.
Secondly, as of January 19, import iron ore prices for China stood at $73.15/mt, up 11.25 percent compared to December 8. However, the composite steel price index (CSPI) for the Chinese domestic market in the given period decreased by 10.0 percent. The rises in import iron ore prices have deviated from the trend of finished steel prices and so the increases are unlikely to continue, especially taking into account the oversupply of ore.
Thirdly, in 2017, China’s finished steel export volume amounted to 75.43 million mt, down 30.5 percent year on year. As for 2018, due to adjustments in export duty, finished steel exports will likely face a more favorable situation. However, regional protectionism in the US and the EU markets will negatively affect Chinese finished steel exports.
Currently, in most regions of China, demand has been slack due to cold winter weather conditions. Although finished steel prices will likely see a rebounding trend due to better expectations for inventory replenishment ahead of the Chinese New Year holiday (February 15-21), finished steel prices will unlikely see big rises, but will instead just indicate slight fluctuations in the coming period.