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

Chinese steel prices are expected to stay range-bound in the near term as the weakness in both supply and demand may persist, according to the latest monthly report of the China Iron & Steel Association (CISA) released on January 19.

Domestic steel demand is likely to remain tepid due to the looming Chinese New Year holiday from January 31 to February 6, while steel supply may also stay at a low level during winter heating season in the northern part of China, which may create a new balance between supply and demand, the association pointed out.

The 2022 Winter Olympic Games will be held in Beijing and Zhangjiakou in North China's Hebei province over February 4-20, and then in March, China will host the annual "Two Sessions" political meetings in Beijing, which means that government authorities will take measures to improve air quality in the "2+26" cities across the Beijing-Tianjin-Hebei region, the CISA noted in its report.

Chinese steel prices continued to soften last December as demand from major steel-consuming industries weakened, while steel output saw a significant recovery, the association pointed out.

By December, China produced 86.19 million tonnes of crude steel, still lower by 6.8% from one year earlier, with daily crude steel output averaging 2.78 million tonnes/day - a substantial growth of 20.3% from that for November, the CISA noted, quoting data from the country's National Bureau of Statistics.

Meanwhile, steel inventories both held by domestic traders and steel mills accumulated somewhat, which may prevent prices from drastic fluctuations, the CISA said.

As of January 10, total stocks of the five steel major products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate in the 21 Chinese cities surveyed by the CISA increased by 0.6% from late December to 7.93 million tonnes, or lower by 0.3% on year. And the volumes held by CISA's member mills posted a sharp growth of 14.4% during the same period to 12.92 million tonnes, though it was 0.8% lower than one year earlier, according to the report.

For the coming term, the CISA suggested domestic steelmakers to pay close attention to Beijing's series of measures to stabilize the national economy in 2022 and to reasonably plan their production to maintain the stability in steel prices.

Meanwhile, the rebound in steelmaking raw materials prices will put Chinese steel producers under pressure in terms of cost reduction, the CISA warned.

As of January 14, Chinese prices of imported iron ore and scrap had increased 5.2% and 2.2% respectively from the end of December, and the national prices of coking coal and coke jumped 9.4% and 19.1% during the same period, the association noted.

Written by Nancy Zheng, zhengmm@mysteel.com

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