In recent years, strict environmental protection inspections have played an important role in shaping the steel market, while finished steel prices have risen rapidly since last week even in current offseason due to production restrictions announced in Tangshan in Hebei Province, as stated by China Securites.
On June 27, Zhai Qing, vice minister at China’s Ministry of Ecology and Environment (MEE), announced that the first group of inspectors in the second round of central ecological and environmental protection inspections have finished preparatory work and will begin their inspections in the near future. The second round of inspections in question will start in 2019 and continue for three years. Based on previous experiences, the environmental inspections will negatively affect supplies of ferrous metals and positively impact their prices.
At present, finished steel prices in China have started to rise due to the production restrictions announced in Tangshan, though demand is unlikely to indicate a significant improvement amid rainy weather conditions and hot temperatures. However, the high levels of iron ore prices will also bolster finished steel prices from the cost side. In addition, some steelmakers will implement maintenance works due to the elevated levels of iron ore prices, which will ease the supply pressure in the steel market.
It is expected that finished steel prices in China will fluctuate within a limited range in the coming period following recent rapid rises.