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China Steel Price Trend and in Market supply

December 10, 2018

Affected by factors such as rapid release of production capacity in January and February and high steel inventories, steel prices fell significantly in March, but such momentum is expected to be reversed. China Iron and Steel Industry Association released a monthly analysis report on April 19, saying that with the arrival of the peak consumption season, increased inflationary pressures and increased demand in the international market, steel prices in the latter period will rise slightly. The market is still oversupply . China Steel Association data show that at the end of March, China Steel Association CSPI steel comprehensive price index was 131.23 points, down 4.42 points from the end of February, a decrease of 3.26%; compared with the same period last year, the index rose by 13.27 points. The increase was 11.25%. In terms of output, the daily output of crude steel in the first quarter reached 1,887,900 tons, an increase of 8.7% year-on-year. Compared with the level of 1,552,200 tons of Nissan in the fourth quarter of last year, it increased by 14.3%. Steel production has grown rapidly, market supply has continued to increase, and the domestic market is still in a situation of oversupply. In terms of inventory, at the end of March, the total social inventories of five steel products in 26 major steel markets nationwide totaled 17.89 million tons, down 650,000 tons from the previous month, a decrease of 3.48%. Since April, the overall level of inventory has continued to decline. By the beginning of April, the total steel inventory fell to 16.89 million tons, down 5.61% from the end of March. However, compared with the end of last year, inventory is still at a high level. The downward trend of steel prices has been reversed. The report pointed out that in mid-March, due to the market demand is in the start-up phase, and the supply of steel in the domestic market has increased substantially, steel inventories have remained high, and pressure on the market has formed, and steel prices have continued to fall. But the price decline has been reversed in late March. According to the report, as market demand has increased, steel inventories have fallen, exports have grown substantially, and steel prices have stabilized. As the domestic market enters the peak season of steel consumption, the intensity of demand has increased, and the contradiction between supply and demand in the domestic market has eased. Due to factors such as rising raw material prices and increased demand for steel in the international market, steel prices in the latter stage will rise slightly. Analysts at “My Steel Network” believe that the current liquidity in the market will push up steel prices. In addition, the continued rise in PPI reflects the rise in prices of industrial products such as steel, indicating that the current real economy has a good demand for industrial products such as steel. The continued high price of crude oil will promote the increase of sea freight, which will lead to high iron ore prices and a certain support for the steel market. China Steel Association said that although the central bank has adopted measures such as raising the deposit reserve ratio and raising interest rates several times, the CPI and PPI data in March indicate that China's price level has not shown a downward trend. Due to factors such as changes in the international financial situation, rising domestic inflationary pressures, and adjustments in economic growth targets, monetary policy has further tightened, and the financial pressures faced by enterprises continue to rise, and market demand will be full of variables. Export growth is more difficult in terms of steel exports. According to customs statistics, in March, China exported 4.91 million tons of steel, an increase of 2.43 million tons, an increase of 98.0%; imported steel 1.53 million tons, an increase of 510,000 tons, an increase of 50.0 %. In the first quarter, China's cumulative export of steel products was 10.51 million tons, a year-on-year increase of 20.7%; the cumulative import of steel products was 4.18 million tons, an increase of 1.7%. The export volume has increased substantially, and the contradiction between supply and demand of steel in the domestic market has been slightly eased. However, China Steel Association believes that the difficulty of export growth will further increase. In the first quarter, China's steel exports maintained a growth rate of 20.7%, mainly due to the recovery of the international market, increased demand and the vacated market space caused by the earthquake in Japan. Due to the slow recovery of the world's major economies, demand growth will fall back, and the Japanese economy is gradually recovering, the difficulty of China's steel exports will further increase. In addition, the continued appreciation of the renminbi has increased the export cost of enterprises, which is not conducive to further expansion of exports.  

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