Chinese Steel Prices to Move Up Slightly in Near Term - CISA

China's domestic steel prices are expected to gain slightly in the coming term, the China Iron & Steel Association (CISA) stated in its latest monthly report on May 18, suggesting that accelerated resumption among steel consuming industries may see steel demand released further.

"COVID-19 has been basically brought under control in China, and the series of measures being adopted by government authorities including tax and fee reductions are expected to effectively offset the impact of the virus," CISA said, predicting that steel demand is likely to improve further with the progressive resumption of work throughout the whole industrial chain.

Chinese steel stocks are being steadily digested, easing the market pressure in the coming term, CISA pointed out. According to the association, as of May 10 total stocks of the five major steel products comprising rebar, wire rod, HRC, CRC and medium plate held by traders in 20 cities across China slipped to 14.98 MnT, down 7.8% from late April, or dropping by 25.9% from the year's high in early March. CISA also noted that inventories among its member steelmakers as of May 10 were down 0.5% from April 30 or 31.5% from March 10 at 14.66 MnT.

However, demand from steel end-users is still on the way to recovery while steel production remains high, placing pressure on the balance between supply and demand in the domestic steel market, CISA warned.

Over May 1-10, daily crude steel output among CISA's member steel mills grew to 2.05 MnT/day. Based on this data, the association estimated China's daily steel output nationwide reached a high level of 2.72 MnT/d over May 1-10, though the average was lower than that for the same period last year, according to CISA.

Meanwhile, prices of imported iron ore kept rising, with the price of Fe 62% imported iron ore fines reaching $91.25/dmt CFR China as of May 15, making for a rise of 10.6% from the end of April, the association observed. During the same period, CISA's Composite Steel Price Index only increased by 2.2%, much lower than the rise in iron ore, which negatively impacted domestic steel producers trying to reduce their production costs.

As for the overseas market, the spread of the pandemic may persist for a while, and the recession in the global economy is inevitable. On May 13, the United Nations had forecast that the global economy may shrink 3.2% this year, marking the worst economic contraction since the Great Depression of the 1930s.

As a result, steel demand from overseas buyers is expected to shrink with the global recession, which is not conducive to China's exports of steel and mechanical and electrical products, CISA noted.

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