China's steel market expected to improve in Sept'21

China expects that in Sept'21, provided there is no major rebound in the pandemic, the steel market may enter a phased peak season, and there is room for demand to rebound, as per the Lange Steel Information Research Centre.

Factors that will aid the rebound

• First, with the easing of weather and rains and the pandemic, demand for steel for infrastructure construction will gradually increase.
  
  
• Secondly, the international shipping market is picking up. Demand for container shipping is strong and the global new ships building market is active, leading to a rise in the demand for marine steel.
  
  
• The automobile and home appliances industries will also enter their peak season in China, and the demand for flat steel will also rebound.
  
  
• Considering the domestic and foreign political and economic environments and the economic trend in the second half of the year, currency liquidity will continue to increase and the environment is conducive to stable economic operations, reducing external pressure. This is conducive for the bulk commodity market, which will drive demand for steel. This month's production and operation activity index is expected to be at 53.8%, and it has been operating in an expanded range of more than 50% for two consecutive months, indicating that companies have a bullish market outlook.
  
  

Production to be under pressure in Q4

The production side continued to be under pressure, with the restrictions continuing to exert pressure, and steel production was further tightened.

The current local production restriction policies have achieved certain results, but in view of the policy objectives, there is still room for further production cuts going ahead. Hence, steel production will continue to be tight in Sept'21 and the fourth quarter.

Way ahead

However, as market demand tends to pick up, the importance of "guaranteed supply" may appear. Therefore, under the policy of "limiting production" and "guaranteeing supply", the decline in steel production in Sept'21 is expected to be relatively limited.

Steel prices are expected to rise, and corporate costs may increase. In Sept'21, limited production and rising demand are also expected to support the upward trend in steel prices.

However, under the continuous control of exports, steel prices are unlikely to rise rapidly but show a moderate upward trend.

The cost of raw materials for companies may rise. At present, the production capacity of major economies in the world is gradually recovering, and the demand for bulk commodities is rising. In addition, iron ore is expected to rebound slightly after two consecutive months of decline. However, the current coke prices are a bother. On the whole, the prices of raw materials and finished products of steel companies may rise simultaneously in Sept'21, as per the China Iron and Steel Logistics Professional Committee.