According to a new report issued by the China Iron and Steel Association (CISA), demand for steel in China in October was still good, exerting a positive impact on steel prices, while rapid release of capacity and cold weather will negatively affect steel prices in the near future. There are a number of factors that participants in the Chinese finished steel market should pay attention to, the CISA stated.
First of all, inventory levels of finished steel have decreased. As of October 31, finished steel inventory in China amounted to 11.27 million mt, decreasing by 0.89 million mt or 7.3 percent compared to October 20, signaling stronger demand. As of November 10, finished steel inventory in China amounted to 10.03 million mt, decreasing by 1.24 million mt or 11.0 percent compared to October 31.
Secondly, according to the National Bureau of Statistics (NBS), China’s crude steel and finished steel outputs totaled 92.2 million mt in October, up 12.7 percent year on year, while the average daily crude steel output of all steelmakers in China amounted to 2.974 million mt in the October this year, down 3.6 percent month on month.
Thirdly, the China Iron Ore Price Index (CIOPI) stood at $126.2/mt as of November 19, increasing by 39.42 percent compared to the beginning of the year, while the China Steel Price Index (CSPI) only increased by 6.52 percent during the given period. The more rapid increase of iron ore prices compared to steel prices continued to exert a negative impact on steel enterprises’ profitability.
As the cold winter season approaches, a second wave of the Covid-19 pandemic will likely hit the whole world - even in China there have been sporadic cases in recent days - which will negatively affect the global market and increase the difficulties facing China’s steel exports.
Currently, cold weather has hit most regions of China, which will reduce demand for steel up to the end of the year and prevent steel prices from recording further sharp gains.