In March, the escalating tensions in the Middle East have brought significant volatility to global commodity markets. Demand for steel improved following the Chinese New Year holiday, while relatively high inventories exerted a negative impact on steel prices in the first part of March, according to the China Iron and Steel Association (CISA).
On March 10 this year, overall domestic inventories of the five main finished steel products in 21 major cities in China totaled 11.64 million mt, increasing by 0.76 million mt or 7.0 percent compared to February 28, as announced by CISA. Meanwhile, on March 20 this year, overall domestic inventories of the five main finished steel products in 21 major cities in China totaled 11.64 million mt, remaining stable compared to March 10, signaling that demand improved to a certain degree later in March.
As for the future market, CISA has urged market players to be alert to the continuous rises in raw material costs driven by geopolitical conflicts, which will likely squeeze the profit margins in the steel industry. Affected by the escalation of geopolitical conflicts in the Middle East, international oil prices exceeded $100 per barrel, triggering concerns over the global energy supply chain, which also drove up the prices of coking coal and coke - providing solid support to steel prices.
Following the blockade of the Strait of Hormuz, shipping costs are expected to rise, likely pushing up iron ore and coal prices, which may further drive up the overall production costs of steel. Consequently, steel mills' profitability will come under pressure.
Furthermore, demand for steel from downstream users improved slowly, which may negatively affect steel prices. CISA advised steelmakers to remain cautiously optimistic and arrange production rationally in April.