Securities Times reported that Chinese steel prices are tending towards stabilization and a slight uptrend after a month corrections. However, the mounting up stocks pressure may buck the price rally.
Dominant rebar futures contract 0912 closed up 0.12% recently in Shanghai Futures Exchange to CNY 4,007 per tonne up by CNY 5 per tonne from lasting trading day the third daily gains. However, the rising amount was limited compared with some CNY 1,000 per tonne or 25% steel price declines in August.
High stocks became the key obstacle arresting steel price rally. According to latest statistics from China Iron & Steel Association China produced 51.65 million tonnes of steel in August, or 1.67 million tonnes per day both hitting historical high. And the monthly production level would translate into annual output of 608 million tonnes.
Mr Li Yizhong head of the Ministry of Industry and Information Technology said apparent steel usage this year would be less than 500 million tonnes versus the real capacity of over 660 million tonnes. And the 58 million tonnes newly added capacities have not been added in calculation.
Domestic daily steel output started to rally after touching a 1.16 million tonnes low point and hit 1.48 million tonnes, 1.65 million tonnes and 1.64 million tonnes in May, June and July respectively. And steel mills still run at a high level in August despite price collapse due to large order books from traders and end users in July when steel prices were on a sharp uptrend.
Analyst Mr Hu said "Steel mills are still under tough pressure and Jiangsu Shagang, China's top private steelmaker also turned down rebar and wire rod prices by CNY 100 per tonne. He said that intermediate traders are strongly proposing a price rise in the traditional hot season despite the current high stocks level.”