China: Construction steel prices to rally further in July

Chinese prices of construction steel including rebar and wire rod are likely to rally further in July, shored up by market participants' hopes for governmental policies regarding the steel sector as well as domestic steelmakers' rising production costs, according to Mysteel's latest monthly report published on July 3.

In June, domestic construction steel prices had rebounded after hitting the bottom due to firm cost support and reinforced expectation of industrial policies, the report noted.

For example, China's national price of HRB400E 20mm dia rebar, a barometer of domestic steel-market dynamics, had bounced back by Yuan 175/tonne ($24.2/t) from end-May to reach Yuan 3,855/t and including the 13% VAT as of June 30, according to Mysteel's assessment.

In July, the room for growth in construction steel production will remain limited, as steel mills generally keep low stocks of raw materials, and they have less enthusiasm in ramping up steel output due to expectation of low profit margins, according to the report.

Last month, output of construction steel grew modestly as steel mills managed to earn some profits, and some resumed production after finishing maintenance works on steelmaking facilities, the report showed. The increment mainly came from electric-arc-furnace steelmakers, it noted.

Over June 22-28, rebar output among the 137 steelmakers across China Mysteel tracks increased 31,000 tonnes on month to 2.77 million tonnes, and the production of wire rod among the 92 mills Mysteel monitors also rose 82,400 tonnes on month to 1.13 million tonnes, Mysteel's data found.

Meanwhile stocks of construction steel items at steelmakers and traders declined sharply during June and the tonnage was far lower than during the same month last year, the report observed.

By June 29, the combined inventories of rebar and wire rod held by the 184 domestic steel mills and at trading warehouses in the 35 cities Mysteel tracks added up to 8.9 million tonnes, thinning by 1.1 million tonnes on month and slumping 5.3 million tonnes on year, Mysteel's data show.

Although construction steel inventories mounted slightly at the end of last month, the accumulation will be limited during July, the report predicted. It also warned that the tight supply of some steel products in specific sizes and specifications may continue or even intensify this month.

As for China's consumption of construction steel during June, the daily trading volume of rebar, wire rod and bar-in-coil among the 237 trading houses Mysteel follows averaged 154,830 tonnes/day, dipping by 1,869 t/d or 1.2% on month.

However, the report said that construction steel demand showed signs of divergence in various parts of the country. Southwest China gaining the most by 18.8% on month in spot sales to average 10,889 t/d in June, while the volume in Northeast China recorded the largest on-month decline of 12.8% to average merely 4,376 t/d, according to Mysteel's data.

Written by Rong Zhang, zhangronga@mysteel.com
Edited by Zhenqi Yang, yangzhenqi@mysteel.com

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.