China's steel prices to stay rangebound - CISA

Chinese steel prices are expected to keep rangebound, as domestic and overseas market uncertainties weigh on sentiment, according to the latest monthly report of the China Iron & Steel Association (CISA).

The strength of the global economic recovery may fail to meet expectations, the association pointed out, citing "uncertain factors" such as the ongoing tension between Russia and Ukraine, rising inflation in many countries and higher interest rates in developed economies such as the United States.

The latest forecast released by the United Nations on May 16 had the global economy possibly growing by 2.3% on year in 2023, lower by 0.8 percentage point from that for 2022, CISA noted.

The domestic steel market also faces many challenges, such as the shrinking demand globally for China-manufactured goods and the persistent decrease in real estate investment and construction, according to the release.

In addition, the steady decline in prices of steelmaking raw materials such as coke and scrap has weakened support for Chinese finished steel prices. CISA's data showed that as of May 12, the prices of domestically-mined iron ore concentrates and scrap dropped by 7.2% and 2.7% respectively on month, while those of coking coal and metallurgical coke slumped by 16.4% and 14.5% during the same period.

However, steel inventories held by Chinese steelmakers and traders declined in early May, easing the pressure on domestic steel prices to some extent, CISA said.

By early May, inventories of the five major steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate held by CISA's member mills had decreased to 17.6 million tonnes, down by 500,000 tonnes or 2.8% from the end of April. Also, the total volume of the five items stocked in the 21 Chinese cities under CISA's survey slipped by 1.8% during the same period to 11.3 million tonnes.

The domestic steel market is still under the pressure of oversupply as steel output is high, while demand from the property sector remains lackluster with the persistent weakness in real estate market, the association noted. Steel consumption from manufacturing and infrastructure sectors is also growing at a slower pace, it acknowledged.

During April, China's daily crude steel output averaged 3.09 million tonnes/day, unchanged from that for March, CISA said, quoting data from the country's National Bureau of Statistics.

Meanwhile, the significant rise in imported iron ore prices placed more pressure on domestic steel producers. Last month, the average price of imported iron ore reached $120.5/tonne, up 30.9% from last December, while domestic steel prices had declined by 1.9% during the same period, CISA's release showed.

Written by Nancy Zheng, zhengmm@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.