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 decreased in August. As of the end of the August, finished steel inventory in China amounted to 15.10 million mt, down 130,000 mt or 0.82 percent compared to the end of July. As of September 13, inventory of finished steel totaled 14.10 million mt, down 1.0 million mt or 6.63 percent compared to the end of August. The decreases in finished steel inventory exerted a positive impact on the finished steel market.
Secondly, in August, the average daily crude steel output in China amounted to 2.815 million mt, up 2.4 percent compared to July. The CISA thinks that China’s crude steel output is still relatively high, and thereby urges steelmakers to control the output capacity utilization rates, to ensure a stable situation between demand and supply.
Thirdly, the China Iron Ore Price Index (CIOPI) stood at $93.96/mt as of September 12, up 12.06 percent compared to that recorded at the end of August, while rising by 36.11 percent from the beginning of the year. As of the same date, the composite steel price index (CSPI) was only up 1.66 percent month on month, while decreasing by 0.59 percent since the start of the year. The far more rapid rises in import iron ore prices have reduced steelmakers’ profitability.
China exported 44.97 million mt of finished steel in the first eight months of this year, down 4.4 percent year on year, 1.5 percentage points faster than the declining pace for the January-July period. The CISA has suggested Chinese steelmakers should analyze the situation in the global market, and improve product quality and export competitiveness.
According to the CISA, in the September-October period of the year, China’s steel output will likely decrease to some extent due to the approaching National Day holiday. Meanwhile, the production restriction measures for the autumn-winter heating season will also negatively affect capacity utilization rates. However, with the weather becoming colder, demand for finished steel will slacken. Moreover, though the increased US-China trade frictions will exert a limited direct impact on the demand for steel, it will indirectly affect demand for steel as it will influence the electrical and mechanical sectors.
In this overall context, the CISA has indicated in its report that demand and supply in the Chinese finished steel market will basically remain balanced in the near future, while finished steel prices in China will fluctuate within a limited range in October.