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 sharply in November. As of the end of November, finished steel inventories in China amounted to 8.91 million mt, down 2.88 million mt or 24.4 percent compared to the end of October. The decreases in finished steel inventory eased the downward pressure on the steel market, resulting in a good performance for finished steel prices.
Secondly, in November, the average daily crude steel output in China amounted to 2.6763 million mt, up 1.8 percent compared to October, up 4.0 percent compared to the same month last year, resulting in strong pressure from the supply side. Accordingly, the CISA has urged steelmakers to adjust their industrial structure and organize production and sales in a reasonable manner.
Thirdly, the China Iron Ore Price Index (CIOPI) stood at $91.63/mt as of December 13, up 6.31 percent month on month. As of the same date, the composite steel price index (CSPI) was down 0.32 percent month on month. Import iron ore prices have edged up while long steel prices have moved down, which has exerted a negative impact on steel enterprises’ profitability.
According to the forecast from the World Steel Association (worldsteel) for 2020, global steel consumption will increase by 1.0 percent in 2020, down 2.0 percentage points compared to the growth rate in 2019. Though trade frictions have eased temporarily, China’s steel exports in the future will still face a difficult situation.
In this overall context, the CISA has indicated in its report that demand will slacken in the coming period due to the colder weather and given the approach of the New Year and Chinese New Year holidays. However, crude steel output in China will likely decrease amid environmental protection measures for the winter season. As a result, finished steel prices in China will continue to fluctuate within a limited range during the remainder of December and in January.