It is reported that steel market has recovered evidently in the past several months and signs show it will continue the momentum in the near future. "We now have enough orders for August and September production, and still are optimistic about October" said an official from Baosteel, the China's top steelmaker.
On July 17th, Xinxing Ductile Iron Pipes released the first financial report in steel industry for H1 2009 with the net profit of CNY 472 million up by 21.19%YoY. The performance was far beyond the market expectation. With the major efforts dedicated to the production of construction steel, Xinxing Pipes is believed to benefit largely from the government CNY 4 trillion stimulus investment. In May, 72 member steel mills of China Iron & Steel Association made a total profit of CNY 1.262 billion the first profit made since October last year. Mr Qi Xiangdong with CISA said "The whole industry will continue to see profit in June as government's investment really supports the market strongly."
However, Xinxing Pipes still holds a prudent attitude toward the financial performance in H2. The company said following the price increase of construction steel, the cost of raw materials will also climb up accordingly which definitely would bring much pressure to the company's cost structure. In addition, the fast release of construction steel capacity in Q2 could also weight on the future market. Therefore it is likely that the price of construction steel will see some adjustments amid the global economy depression.
Many other steel mills also hold the same view with Xinxing Pipes. They said the domestic demand is not firm enough which coupled with the soft export market has made steel industry extremely vulnerable to the capacity release.
China's steel industry witnessed an overall deficit last year amidst the global financial crisis. But now steel price has seen 14 consecutive weeks' increase up by 20% from the April low. In a recent analysis report, CISA attributed the sound steel price increase to the government's stimulus package which has evidently pushed up the domestic steel demand.
However, this round of price increase still didn't convince all the steel mills that market would continue to be strong in the second half of the year. A senior official from a north China based steel mill said "Materials cost remains a huge uncertainty and the declines from export would finally flood back to domestic market all of these will seriously press down the domestic market."
According to the statistics of Customs, through June, the China's net steel import reached 1.35 million tonnes a severe conversion from 19.88 million tonnes of export in the same period of last year. Mr Qi Xinagdong said "Though the export in June has increased 80,000 tonnes from that of May, the volume still was 72.6% lower than that of last year. We believe the export situation will very much rely on that of July and August."
Mr Shan Shanghua the general secretary of CISA said "We still much concern the huge steel capacity. He said that 200 million tonnes of over capacity could break out quickly and drag down the market.”