Chinese steel prices to face the greatest complexity in Dec'21 - Mysteel

In December, China's domestic steel prices may struggle and fluctuate "with the greatest complexity in history" in both the fundamentals and the futures market with both positive and negative factors present, Wang Jianhua, Mysteel's chief analyst, shared his near-term market outlook on November 30.

Meanwhile, positive and negative factors are paring and battling against each other in China's domestic steel market, among which are the possible growths in steel demand around the yearend or the start of next year due to the likelihood for the government to rectify its control over the domestic property market while on the other hand less construction steel consumption in winter, Wang elaborated.

In December, the demand from the property market may still decline though the pace may slow, and China's apparent steel consumption with the property as a pillar may still have fallen by 20% on year in total for November against the 25% on-year falls for September and October, he quoted Mysteel's tracking.

On the other hand, China's steel supply is with uncertainties too, as those that have reached their annual production cuts may ramp up output in December while those that have yet fulfilled the tasks of bringing down their output to below the 2020 levels may stick to production cuts, he added.

For December, China's hot metal output stands the likelihood of recovering to around 2.06 million tonnes/day from below 2 million t/d until December 2, as 13 of the 16 blast furnaces with the resumption plan will come on stream as planned, and the other three are still assessing the situation, Wang shared, adding, though, that the projection may be rather optimistic with the dismal in demand for now.

In December, among the positive factors in China's steel market is the little chance for the domestic steel demand to decline substantially on month in the two months before the Chinese New Year, and stocks in the commercial warehouses, thus, may continue with the reduction since November, thus being supportive to the steel prices, he pointed out.

The Chinese New Year holiday for 2022 will start on February 1, Mysteel Global understands.

Besides, China's Purchasing Managers' Index (PMI) for the country's manufacturing industry returned to the expansion zone in November, scoring 50.1, or up 0.9 basis point on month after having slid on month since April, as reported, which indicated better demand should the index still above 50 for December.

In the steel futures market, those holding in short positions appear under greater pressure after their rather forceful strikes on prices earlier on and the possibility for them to reduce or close their positions may also lend support to China's steel prices both in the futures and physical markets, Wang added.

For December, China's steelmaking raw material prices may incline or stabilize too, as the domestic coke producers especially those at losses may bargain hard for price increments after eight rounds of coke price cuts by Yuan 1,600/tonne ($251/t) in November, and imported iron ore prices may be rangebound too, which in all are positive factors to the domestic steel prices, according to him.

Written by Hongmei Li, li.hongmei@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.