China's steel market 'cautiously optimistic' about August outlook: NDRC

Mysteel Global: On 31 July, the Price Monitor Center of China's National Development and Reform Commission (NDRC) released its latest survey results on key wholesale markets for steel nationwide, including South China, and the Shanghai and Tianjin Municipalities. The survey's results presented a cautiously optimistic outlook for the Chinese steel market in August, Mysteel Global noted.

The survey, which measures expectations against six key indices, found that the Sales Price Expectation Index and Purchase Price Expectation Index for the wholesale markets stood at 50% and 48.1% for August, respectively, representing significant increases of 12.7 and 3.7 percentage points from the previous month.

These figures indicate improved, though still cautious, sentiment in the market, with both indices hovering around the 50% threshold, according to the NDRC report. As for demand, the indexes for both sales volume and stocks showed better expectations for August. The Sales Volume Expectation Index rose to 61.1%, up 13% m-o-m, while the Inventory Expectation Index fell below the 50% threshold to 44.7%, down 12.8 percentage points from the previous month.

Demand for steel was largely hampered by tropical storms and typhoons hitting parts of China in July. However, the adverse weather conditions are expected to improve somewhat this month, potentially boosting downstream demand, the NDRC indicated.

Additionally, the NDRC noted that the transition to new rebar standards has profits at several steelmakers to shrink, prompting them to curb production. This had also weighed on prices of raw materials for steel production, including iron ore and coking coal, in July.

With sales prices expected to rise, the cost pressures and meager profits experienced in July may be alleviated in August. This is reflected in the Sales Cost Expectation Index and Sales Profit Margin Expectation Index for August, which reached 54.8% and 51.9%, respectively, representing increases of 7.6 and 5.7 percentage points from the previous month.

The NDRC predicted that market sentiment will likely recover somewhat, with the implementation of supply cuts by steelmakers helping to balance the supply-demand dynamics in China's steel market. This slight recovery in market sentiment may gently lift domestic steel prices this month, according to the report.

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