MYSTEEL: Limited rebound seen in China's steel prices in January

Mysteel Global: China's steel market is expected to remain under pressure in January, with upward momentum being limited, according to Wang Jianhua, chief analyst at Mysteel, in his latest monthly outlook. Both supply and sentiment factors are unlikely to provide significant support to lift the market.

On 30 December, Mysteel reported that the national composite steel price had dropped by Yuan 7.3/tonne ($1/t) compared to November 29, settling at Yuan 3,640.1/tonne. The slight decline reflects a cautious market sentiment, with particular weakness observed in the medium plate and hot-rolled coil (HRC) sectors, Wang noted.

Wang emphasized that the steel market is awaiting positive macroeconomic policies or stimulus measures from the central government, such as a reduction in the reserve ratio, to lift market sentiment. "Any further signals like interest rate cuts or accelerated issuance of special bonds could provide a strong start for 2025, potentially benefiting the ferrous market, including steel," he observed.

The market's call for macroeconomic stimulus stems from the weak performance of economic indicators in November, Wang explained. For example, accounts receivable among domestic industrial enterprises increased to Yuan 26.92 trillion in November, up from Yuan 26.33 trillion in October, indicating weakened financial liquidity within China's industrial sectors. This could dampen end-user demand for steel products, Wang warned.

Additionally, the anticipated return of Donald Trump to the U.S. presidency in January has raised concerns about potential new tariffs and trade disruptions, which could further pressure steel market sentiment in the coming month, he added.

On the supply side, China's steel market is experiencing reduced inventory levels, with those in November marking the sixth consecutive month of decline. Mysteel's data also shows that as of 27 December, inventories of the five major carbon steel products - rebar, wire rod, hot-rolled coil, cold-rolled coil, and medium plate - held by the 184 steelmakers and trading houses in 35 cities nationwide had dropped to a multi-year low of 11.09 million tonnes, down by 641,000 tonnes from 27 November.

However, inventory levels are expected to stabilize in the next two weeks, Wang said, as spot trading activity in December has been relatively sluggish. The slowdown in construction activity due to the Chinese New Year (CNY) holiday from January 28 is also expected to dampen demand for steel products.

Besides, China's hot metal production remained high in December despite an on-month decline. Mysteel's survey of 247 Chinese blast furnace (BF) steel mills found that daily hot metal production during December 20-26 averaged 2.28 million tonnes, down by 60,000 tonnes from the week ending 29 November.

Wang said that based on Mysteel's data, he estimated that currently domestic steelmakers' profits are in the range of Yuan -50 to 200/tonne, depending on the steel products produced, suggesting that some steelmakers are still maintaining profits.

"During the CNY holiday, stock accumulation is anticipated as steel mills are facing low inventory levels and available profits, and so show limited interest in further reducing production," Wang said.

On the cost side, the steel sector may face weaker cost support in January, as the prices of key raw materials - especially those of coke, coking coal, and iron ore - are expected to soften, with replenishment activities slowing down as the CNY holiday approaches.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.