Chinese steel prices to keep range-bound in near term - CISA

Chinese steel prices are expected to stay range-bound in the coming term after their substantial fall in October, as both demand and supply remain weak with winter approaching, according to the latest monthly report of the China Iron & Steel Association (CISA) released on November 19.

The country has entered the traditional off-season for steel consumption with temperatures falling in many regions, and this may put more pressure on domestic steel prices, the association noted.

Domestic prices fell sharply last month due to the significant decrease in demand with the slowing growth among major steel-consuming industries. At the same time, steel consumption from end-users was also reduced by the impact of restrictions imposed on their energy consumption, the extreme weather and the resurgence of COVID-19 in some regions, the report noted.

However, domestic steel supply and demand are likely to remain in balance in the coming term as steel output is expected to stay at a low level due to the impact of tougher production curbs among steel mills in northern China. The mills affected are in the so-called "2+26" cities in North China's Beijing -Tianjin- Hebei area and nearby regions, the Fenwei Plain area and in North China's Shanxi, East China's Shandong and Central China's Henan, the association notes.

During October, domestic crude steel output fell for the sixth month to reach 71.58 million tonnes, with the daily output easing by another 6.1% on month to 2.3 million tonnes/day on average, CISA said, quoting data from the country's National Bureau of Statistics.

As of November 10, total inventories of the five steel major products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate in the country's 20 cities surveyed by the association decreased by 3% from late October to 9.4 million tonnes, while the total stocks held by CISA's member mills increased by 5.2% during the same period to 13.5 million tonnes.

Domestic steel prices are hardly likely to grow fast in the coming term, but a sharp fall is also impossible, CISA stated. It suggested that domestic steel mills monitor the changes in demand closely and optimize their product structures to stabilize home-market prices.

Also, Chinese steelmakers will face more pressure to lower their production costs considering the high coking coal and coke prices, CISA warned. As of November 12, the national price of coking coal was Yuan 3,548/tonne ($555.6/t), higher by 138.4% from the beginning of this year, while that of coke had increased by 54.6% during the same period to Yuan 3,610/t. These increases compare with the growth of just 9.9% in finished steel prices over the same period, it noted.

Written by Nancy Zheng, zhengmm@mysteel.com

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