A report issued by the China Iron and Steel Association (CISA) states that, influenced by the rapid increase of Chinese domestic steel production, domestic inventory maintains a high level while the total steel product export volume is low. Thus, in the domestic market the oversupply situation remains and in future steel prices are unlikely to post a massive increase.
The report states that in March Chinese economic growth was robust. As the main season for steel consumption approaches, market demand is triggered. Additionally, as in the international market raw material prices are increasing, domestic steel prices have increased obviously.
The report considers that the increase in costs places great pressure on domestic steel makers. The massive increase in iron ore, coking coal, scrap and ocean freight causes steelmakers' costs to increase. Although by adjusting steel product prices upward, the cost pressure can be transferred to a certain degree, considering the situation of downstream industries, steel product prices will not increase endlessly, and so the steel industry will face a very difficult situation.
However, there are also some reasons for optimism. The Chinese economy maintains a good performance, driving the increase in demand. Also, the international market is improvilng, thus favoring Chinese steelmakers's export activity.
Additionally, steel inventory is decreasing. At the end of March, total domestic inventory of five steel categories in 26 major steel markets in China stood at 17.29 million mt, registering a month-on-month decrease of 0.8 million mt or 4.42 percent.