Wu Wenzhang, President of Shanghai SteelHome website, delivered the keynote speech on 6th steel Industry Development Strategy and Supply/ Demand Forum hosted by Steelhome on 23rd-25th April.
His major points are listed below.
First, to see domestic supply/demand balance in a worldwide perspective.
Second, China steel industry has advantages in technology, equipment and scale, and China also see growing demand. Therefore, the increase in global steel demand should continue to be fed by China .
Third, China steel enterprises are challenged by volatile metallics supply and purchase price and uncertain steel sales price.
Forth, the flourish in steel information industry has already enhanced transparency of spot market.
Fifth, the diversified investors in futures trading have varied understandings in macro economy, government policies and market movement, so the trend of spot market and futures market will not be the same or similar.
Sixth, as increasing steel mills and distributing enterprises are involved in futures trading or e-commerce to hedge, China steel market would more often see high inventory.
Seventh, China steel demand would keep rising in 2010-2012, and global market would see temporary shortage of metallics supply.
Wu answered some hot topics in the conference.
Regarding the continuous growing iron ore price, Wu gave two reasons: a) the monopoly of three mines b) global pig iron production break record. Although Rio Tinto and BHP Billiton’s iron ore production hit historical high, Vale’s production recovery appears to be slow, and they cannot meet the fast increase of pig iron production.
Regarding high inventory in China spot market, Wu attributed to the large price spread between spot price and futures price.
In 2010, flats market would reverse its weak performance as what happened in 2009 due to improved demand in downstream sectors and better export market.
Wu presented his points of view of China steel market of 2010:
1 Global crude steel demand would attain over 1.39 billion tonnes in 2010. Global metallics market would see temporarily tight supply and it may reach supply/demand equilibrium at a high price level.
2 Chinese GDP is expected to grow at least 9 percent in 2010, and the growth pace would be fast in the first half and slow down in second half. China crude steel consumption in 2010 would amount to 600-610 million tonnes, up 12 percent year on year.
3 China crude steel production is restricted on tight iron ore supply. The iron ore imports may stand around 680 million tonnes in 2010, up 8.4 percent year on year.
4 China crude steel production would be 630 million tonnes in 2010, up 10.9 percent year on year. Net exports of crude steel would be over 20 million tonnes. The apparent consumption of crude steel in China would rise to 606 million tonnes, up 7.3 percent year on year.
5 China metallics price would remain high in 2010 due to supply shortage.
6 Chinese steel enterprises have great pricing power and they are capable of passing on higher operation cost.
7 China steel price level in H2 would be higher than that in H1.
Wu added that China HRB price may exceed CNY 5000 per tonne in 2010 before the conference ended.
(Source: Steelhome.com)