Chinese steel prices are expected to continue the rebound that began in late October and trend upward overall in November, supported by the brighter market sentiment, Mysteel's chief analyst Wang Jianhua projects in his latest monthly outlook. Market fundamentals will likely improve as well, he suggests.
Mysteel's assessment of China's national composite steel spot price touched a more than three-month low of Yuan 3,412/tonne ($479.4/t) including the 13% VAT on October 21 but within ten days, the price had rebounded to Yuan 3,458/t to end the month lower by just 0.3% on month.
Late last month, trade talks between China and the U.S. in Malaysia, along with the summit meeting of the two nations' leaders in South Korea, "sent positive signals to the world," according to Wang, and boosted expectations for China's industrial sector including steel.
During the trade negotiations, Washington agreed to cancel the 10% tariff on fentanyl-related products from China, extend the suspension of the additional 24% tariffs on Chinese goods for one year, and suspend its Section 301 investigation measures against China's maritime logistics and shipbuilding sectors for one year, as Mysteel Global reported.
With the recovery of market confidence, Chinese steel prices are expected to continue their upward correction, particularly since the prices had previously bottomed out, Wang projected.
On fundamentals, China's overall steel supply is seen shrinking further this month under the government-mandated production curbs and steelmakers' thinning margins, according to Wang. This will provide upward momentum for steel prices too.
Many steel mills in Tangshan in North China's Hebei had cut their blast furnace (BF) operations by 30% during October 27-31 as ordered by the local government struggling to reduce atmospheric pollution, as Mysteel Global reported.
As of the end of October, the total output of hot metal among the 247 BF steel producers nationwide under Mysteel's regular tracking averaged 2.36 million tonnes, lower by 2.2% from a month earlier and falling for a fifth straight week.
By the same time, only around 45% of these 247 mills could make some profits on selling their steel products, down by a significant 12 percentage points on month, the survey findings showed.
Entering this month, BF mills in North China will continue to restrict their output as authorities in Tangshan and Tianjin have re-issued warnings about heavy air pollution and have required local industrial companies to activate response measures starting from November 3, Mysteel Global learned.
On the other hand, steel demand is expected to expand this month, driven by the improved construction activity, Wang predicts.
China's Purchasing Managers' Index for the construction sector registered 49.1 in October, with the sub index for new orders rising 3.7 on month to reach 45.9, according to the data released by the country's National Bureau of Statistics.
The recovery in steel demand will likely be reflected in the further decline in China's steel inventories, Wang noted.
By the end of October, the total stocks of the five major carbon steel products held by steelmakers and trading houses across the 35 cities under Mysteel's monitoring stood at 15.1 million tonnes, lower by 5.4% from the beginning of last month.
The inventories of these steel products are expected to drop by some 1 million tonnes during November, allowing steel prices to rebound more firmly this month, Wang predicts.
Source:Mysteel Global
