China's steel prices to stabilize in the coming term - CISA

The continuous fall in China's steel prices is expected to end in the coming term and prices stabilize as supply and demand may balance with the gradual recovery of demand, the China Iron & Steel Association (CISA) suggests in its latest monthly report.

For the second half of this year, steel demand is likely to improve gradually as the effect of Beijing's series of measures to stabilize economic growth will emerge. Apart from the existing measures, the government may step up the issuance and use of special bonds, enhance the implementation of the 102 major projects earmarked for the currently Five-Year Plan period, and boost consumption, CISA noted.

On the supply side, steel output may decrease steadily this month as domestic steel prices have fallen sharply, deepening the losses of steel mills and dampening their enthusiasm for production, according to the report.

For the first ten days of July, daily crude steel output among CISA's member steel mills averaged 2.08 million tonnes/day, down 1.2% from that for late June, it noted. Based on this data, the association estimated that daily crude steel output nationwide decreased by 0.8% during the same period to 2.87 million t/d.

With the significant easing of transport congestion over the past two months, steel demand in some regions had kicked in and steel inventories held by domestic traders had emptied to some extent.

As of July 10, the total volume of the five key steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate in the 21 Chinese cities under CISA's survey came in at 12.03 million tonnes, lower by 3.9% from the end of June.

However, inventories of the five steel items held by CISA's member mills rose by 6.5% from ten days earlier to 18.05 million tonnes as of July 10, or higher by 28.4% on year, CISA pointed out, noting that this still placed some pressure on domestic steel prices.

The major reason for the slump in domestic prices was the fact that the recovery in demand was slower than that of output. CISA suggested that Chinese steel producers arrange their operation rates "reasonably" to guarantee the balance between supply and demand and maintain stability in the domestic steel market.

Besides, domestic steelmakers still need to take measures to ensure the availability of steelmaking raw materials and stabilize their prices, the association warned. The mills must try to lower their production costs, as the impact of tightened raw materials supply on mills' production costs may continue in near term with the ongoing conflict between Russia and Ukraine.

Written by Nancy Zheng, zhengmm@mysteel.com

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