The China Iron and Steel Association announced that supply still exceeds demand in China''s steel market and there is little possibility for an aftermarket price hike.
According to a report released by CISA, due to continued growth in production, high inventories and low export volume for steel, supply is likely to continue to exceed demand.
The growth of the Chinese economy maintained momentum in March. Due to increasing demand for steel products in the hot season plus rising iron ore costs and steel prices in the international market, domestic steel prices have increased rapidly, steel inventories have dropped slightly and steel exports have risen.
The report noted that costs of raw materials needed for steel production especially iron ore, coke, steel scrap and seaway freight are on the rise currently, putting steel mills under huge pressure. Although a steel price hike may transfer some of steel mills'' cost pressures to downstream industries, steel price increases are limited by what consumers can afford to pay. Therefore, China''s steel industry still faces a very serious situation.
Although the global economy has entered the recovery stage, market demand hasn''t been fully restored. However, steel output in major steel-producing countries continues to rise MoM adding more pressure on China''s steel exports. With increasing global trade disputes, trade protectionism and climate change, the outlook for China''s steel exports is not optimistic.
However, every coin has two sides. China''s recovering economy feeds the growth of domestic steel demand; raw material price hikes increase the cost of steel; the rebounding global economy is also beneficial for expanding steel exports.
In addition, steel inventories have begun to decline. Total inventories at China''s 26 major steel markets amounted to 1.729 million tonnes, down 800,000 tonnes over the previous month, decreasing by 4.42%. The CISA pointed out that steel inventories'' decline showed that market demand was starting to pick up.