Oversupply to end climb in Chinese steel prices - CISA

In the coming term, China's domestic steel prices are unlikely to continue their significant rise of late as oversupply will negatively impact markets, according to the monthly report of the China Iron & Steel Association (CISA) published on June 17 which cited the rapid reengagement of productive steel capacity in China and shrinking demand for steel abroad under the impact of COVID-19.

"China's steel market is still being pressured by oversupply as demand from end-user industries has not fully resumed compared with the faster release of domestic steel capacity," the association pointed out, suggesting that domestic steelmakers should adjust their production based on exact demand.

China's crude steel output reached 92.3 million tonnes in May, growing by 4.2% on year, with the daily output posting a month-on-month rise of 5% to touch a new record high of 2.98 million tonnes/day last month, CISA said, quoting data from the country's National Bureau of Statistics.

China's domestic steel demand has seen an obvious recovery over recent weeks, thanks to improvements in pandemic control and economic development. As of June 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 checked by CISA dropped to 12.72 million tonnes, making for a substantial decline of 6.34 million tonnes or 33.3% from the year's high recorded in March.

The NBS data quoted by the association showed that, over January-May, China's total fixed asset investment recorded a slower on-year decline of 6.3%, lower by 5.5 percentage points compared with that for the first four months, indicating the steady recovery among steel consuming industries.

Domestic steel demand is expected to improve further with the support of a series of government-backed measures to boost infrastructure construction and expand investment, CISA predicted.

However, China's steel exports may face more difficulties from the rise in international trade protectionism and from the on-going battle against the virus being waged abroad, CISA said, with the balance between supply and demand expected to face great pressure.

Total steel demand in 2020 is seen contracting by 6.4% on year because of the global COVID-19 crisis, CISA noted from the World Steel Association's latest Short-Range Outlook published on June 4.

Besides, prices of imported iron ore have been hovering at a high level, which is not conductive to domestic steelmakers increasing their profit margins. As of June 12, the price of Fe 62% imported iron ore fines grew to $102.52/dmt CFR China, higher by 3.6% from the end of last month, CISA noted.

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