CISA: China's Steel Prices Expected to Remain Stable in Near Term

China's domestic steel prices are expected to remain stable in the coming term as domestic steel demand may improve further with China's effective control of the COVID-19 outbreak and the accelerated resumption of business among steel end-user industries, the China Iron & Steel Association (CISA) stated in its latest monthly report on March 18.

Besides successfully directing the country's battle against the virus, China's central government has taken a series measures to facilitate economic and social development, including increasing investment in infrastructure and shaving the reserve requirement ratio of commercial banks, the report observed.

Beijing's policies and measures are actively hedging the impact of the epidemic, and steel demand is expected to improve further in sync with the continuous recovery in the domestic market, CISA noted.

Besides, steel production has slowed down, which may help to ease the oversupply in China's steel market, the association pointed out.

CISA's latest data showed that daily crude steel output among member steel mills averaged 1.81 million tonnes/day over March 1-10. Based on this data, the association estimated that daily crude steel production for the whole country averaged 2.47 million t/d during the same period, much lower than the average level of 2.58 million t/d for January-February quoted from the National Bureau of Statistics.

However, steel stocks are still at a very high level, putting more pressure on the domestic steel market. As of March 10, finished steel inventories at CISA's member steel mills reached 21.41 million tonnes, higher by 4.5% from the total as at February 29, or recording a large increase of 125% from the start of this year.

The recovery in demand still needs a while longer to bed down, CISA warned, suggesting that domestic steel producers should carefully analyse the market situation and arrange production reasonably to maintain the smooth running of China's steel industry.

The rise in prices of imported iron ore was in contrast to the trend in domestic steel prices, and negatively impacted domestic steel producers trying to minimize their costs and improve profit margins, CISA said.

As of March 13, the price of Fe 62% imported iron ore fines had increased to $90.15/dmt CFR China, up 6.8% from the end of last month, while the association's Composite Steel Price Index slid by 1.1% during the same period, CISA's data showed.

Amid the growing uncertainties in overseas markets, Chinese steel exports will also face more difficulties and greater challenges, CISA feared. Steel demand in the global market is expected to be affected by the rapid spread of the COVID-19 worldwide, with the economies of Europe, North America, Japan and some Southeast Asian countries likely to be severely strained, the association predicted.

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