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 have increased. As of the end of the February, finished steel inventories in China amounted to 22.32 million mt, up 10.42 million mt or 87.53 percent compared to the end of January. In March, the rises in inventory levels of finished steel have been slower. As of March 8, inventories amounted to 22.96 million mt, up 640,000 mt or 2.86 percent compared to the end of February, while rising by 13.50 million mt compared to the beginning of the year, up 1.43 times. The increases in finished steel inventories will exert a negative impact on finished steel prices in the future.
Secondly, in the January-February period of the current year, the average daily crude steel output in China amounted to 2.5353 million mt, up 9.2 percent year on year and rising by 3.25 percent compared to December last year. The CISA considers that steelmakers in China should pay attention to capacity utilization rates or else supply will increase too quickly and negatively impact finished steel prices.
Thirdly, following the dam collapse in Brazil, import iron ore prices for China have indicated rapid rises. Although a correction to $85.31/mt was seen as of March 15, this still represented a rise of $16.08/mt or 23.23 percent compared to the beginning of the year, outpacing the price rises in finished steel and increasing the pressure on Chinese steelmakers from the cost side.
Fourthly, China’s finished steel exports indicated a 6.9 percent month-on-month decline and 7.0 percent year-on-year drop in February. China will still face a difficult situation in exports in the coming period due to ongoing trade protectionism.
The CISA report indicated that finished steel prices in China are unlikely to see big increases, but will likely continue to fluctuate within a limited range, while producers’ capacity utilization rates are expected to increase amid better demand during the traditional peak season for sales.