China's steel prices likely to soften in May

China's steel prices are expected to soften in May as the market enters its traditional seasonal demand lull, while escalating global trade uncertainties continue to cloud the outlook, according to a steel sector survey released by the National Development and Reform Commission (NDRC) on May 6. The survey covers major wholesale steel markets in South China, Shanghai, and Tianjin.

The assessment has examined six key indices, revealing marginal declines in both the Sales Price Expectation Index and the Purchase Price Expectation Index, signaling a weakening trend in the domestic steel market this month.

For May, the Sales Price Expectation Index for the wholesale markets the Commission surveyed registers 46.43%, falling below the 50% threshold after three consecutive months above it and marking a sharp decline of 19.31 percentage points from April. Similarly, the Purchase Price Expectation Index plunges 20.74 percentage points on month to 45.33%, also falling through the 50% mark.

These declines reflect growing pessimism among both sellers and buyers regarding steel market prospects this month, Mysteel Global notes.

Moreover, a sharp fall in this month's Sales Volume Expectation Index - down 28.01 percentage points from April to 47.45% - indicates a relatively bearish outlook on the demand side.

The wholesale steel markets may face a slight inventory buildup in May as sales weaken, the report predicts. The Inventory Expectation Index increases slightly by 2.03 percentage points to 41.84%.

Profitability among domestic steel producers is also expected to come under pressure this month. The Sales Profit Margin Expectation Index drops sharply to 44.39%, down 19.96 percentage points from April, while the Sales Cost Expectation Index is lower by a modest 6.53 percentage points to 49.49%.

The sharper decline in steel selling prices compared to production costs could lead to tighter profit margins for steelmakers in May, the report explains.

The NDRC attributes April's weaker-than-expected market performance to insufficient supply-side discipline and rising global trade friction including tariffs and export restriction cases, which are expected to continue weighing on the market in May. Combined with the seasonal demand slowdown and weaker cost support, these headwinds are likely to pressure China's steel market further this month, the report concludes.

Source:Mysteel Global