The China Iron and Steel Association (CISA) has announced that in early August (August 1-10) this year, the average aggregate daily crude steel output of large and medium-sized steel enterprises in China - all CISA members - totaled 2.0481 million mt, up 5.26 percent compared to late July (July 21-31). During the previous period, late July, the average aggregate daily crude steel output had decreased by 3.56 percent, which means that the decline of production switched to a rise in early August, thereby resulting in oversupply in the market.
The output rise resulted in increases in the inventory levels in the Chinese steel market. As of August 10, the finished steel inventories of large and medium-sized steel enterprises in China amounted to 12.8635 million mt, increasing by 13.25 percent compared to July 31. This followed a 10.21 percent decline in stocks in the previous 10-day period.
Oversupply in the Chinese market led to a decline in steel prices in August. The average rebar price in China softened by RMB 240/mt ($34/mt) in August, falling to RMB 3,727/mt ex-warehouse by August 30, according to SteelOrbis’ data.
Although steel prices have posted a moderate increase in early September amid the expected demand recovery this and next month, overall steel production in China has remained high, which will prevent prices from recording a further significant rise later in September, market sources believe. Only if the Chinese authorities implement tighter production restrictions and if demand finally improves, can there be some positive movements in fundamentals.