Chinese steel demand under pressure during off season - CISA

The arrival of winter in China and rising numbers of COVID-19 infections will likely negatively impact the country's steel demand going forward, the China Iron & Steel Association (CISA) warned in its latest monthly report.

Many regions have entered the traditional off season for steel consumption with the fall in temperatures, while at the same time, the central government's optimized policies on COVID-19 control will nonetheless see many people infected in the short term, which may also affect steel consumption, CISA noted.

Although steel stocks at traders' warehouses have continued to decline, inventories held by Chinese steel producers stayed high, indicating the arrival of the slack season for steel demand, the association pointed out.

As of December 10, inventories of the five key steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate in 21 Chinese cities under CISA's survey declined to 7.35 million tonnes, down 0.5% from the end of November, or falling by 12.6% on year.

During the same period, the volume of these five major products held by CISA's member steel mills in early December had increased by 0.3% compared with ten days earlier, or higher by 15% from the same period last year.

However, China's new COVID-related measures are conductive to local governments intensifying their efforts to boost economic recovery in their specific areas, which may also help stabilize steel demand in the future, according to CISA's report.

In parallel, the relationship between supply and demand may improve further in the coming term with the continuous decrease in steel output, the association expected.

Over the first ten days of December, daily crude steel output among CISA's member mills registered 1.99 million tonnes/day on average, lower by 2.1% from that for late November. Based on this data, the association estimated that daily crude steel output nationwide slipped by 0.9% during the same period to average 2.46 million t/d in early December.

Chinese steel producers still face many pressures to reduce their production costs in view of the higher raw material prices, CISA warned. As of December 15, the average price of imported iron ore in China had increased to $112.15/tonne, surging by $32.77/t or 41.3% from the end of October, while average prices of finished steel only gained 3.3% during that period.

Written by Nancy Zheng, zhengmm@mysteel.com

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