China: Baosteel rolls over steel prices for Aug '21 shipments

China's leading steel producer, Baoshan Iron and Steel (Baosteel), has rolled over prices of various steel products, except for some grades of grain-oriented electrical steel sheets, for Aug '21 shipments.

The company has rolled over prices for the second consecutive month in sync with those for Jul '21 shipments.

SteelMint analyses possible factors behind the rollover in prices

1. Domestic prices came under pressure in June: Domestic prices started to tumble from mid-June. Prices for hot rolled coil (HRC) had dipped to RMB 5,380-5,450/t (Eastern China) towards the end of the month from around RMB 5,610-5,650/t in mid-month. However, prices started to gain upward momentum to stand at RMB 5,700-5,770/t (Eastern China) as of last week.

2. Company allows market to absorb previous hike: Baosteel has rolled over prices in a bid to let the market absorb the previous hike. Sources say the company's list price was already higher in comparison with that of other domestic mills.

Furthermore, the company is following the government's policy to curb a rapid rise in prices.

Prior to this, the manufacturer had steeply increased its finished flat steel prices by about RMB 300-650/t for Jun '21 shipments on the back of rising steel prices and increased consumption in the preceding quarter.

These prices are of the Baoshan works based in Shanghai's, Meishan mill in East China's Jiangsu province, Qingshan plant in Central Chia's Hubei province, and the Dongshan works in South China's Guangdong province.

Outlook

SteelMint feels there will be a likely demand-supply mismatch in the upcoming months. A few factors are listed below:

• Authorities in the Jiangsu and Anhui provinces are likely to order steelmakers to keep their crude steel output this year in line with levels achieved in 2020.
  
  
• The Tangshan provincial government has been strict on the carbon emission norms, and has put a leash on some sintering and pelletising units, lime kilns and coke ovens.
  
  
• Demand will pick up post-monsoons, which will get the support of the recently-announced cut of 0.5 percentage point in the Reserve Requirement Ratio (RRR) by the People's Bank of China. It will lead to an inflow of RMB 1 trillion into the Chinese economy.