China's construction steel prices to bottom out in July

China's prices of construction steel items including rebar and wire rod stand a chance of bottoming out and then rebounding during July, Mysteel predicts in a new report published on 2 July. The imbalance between demand and production will likely ease and market sentiment may improve, it said.

Last month, domestic construction-steel prices witnessed significant declines, mainly due to the low steel demand, according to the report. As of 28 June, the country's national price of HRB400E 20mm dia rebar, a barometer of steel-market sentiment, had plunged by yuan 204/tonne ($28/t) from the end of May to sit at yuan 3,626/t including the VAT, Mysteel's assessment showed.

During June, construction steel output across the country declined initially before subsequently rising, with the output growth among mini-mills outpacing that of integrated mills, the report noted.

By the end of June, weekly production of rebars among the 137 Chinese mills Mysteel follows came at 2.45 million tonnes (mnt), rising by 52,900 t on month though still lower by 317,500 t on year. For wire rods, output among the 92 mills Mysteel follows reached 999,300 t over the same period, up 47,400 t on month and down by 126,500 t on year, Mysteel's data found.

China's construction steel output may decrease this month, with steel mills in southern China contributing the most to the production reduction. Rebar output among the 137 sampled mills may fall to around 2.35 mnt/week, the report estimated.

The trading enthusiasm of Chinese market participants for construction steel appeared dull during June due to prolonged rainfalls in South China and heavy downpours in East China, the report said.

This was in line with Mysteel's survey of the spot sales of rebar, wire rod and bar-in-coil among the 237 trading houses it monitors nationwide, which showed their trading volume averaged 119,412 t/day last month, shrinking by 10.1% on month or down 22.9% on year.

For this month, long steel demand may show signs of improvement beginning around mid-July when the rainy season is expected to end, the report predicted.

On the other hand, domestic steel mills are not expected to face significant pressure from construction steel stocks this month due to a steady increase in their deliveries to the market, according to the report, adding that the tonnage held among mills may also stop accumulating this month. In contrast, a decline retail steel inventories seems unlikely due to a rise in deliveries from mills, it noted.

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