Reuters quoted the China Iron & Steel Association said China massive steel sector which has begun cutting production in the face of falling prices and softening demand is nearing the break-even point.
CISA said in a statement "Most steel products prices have extended falls in July to a level almost below the mills' production costs, and this will continue supporting prices. It said the production cuts and the limited room for further falls in margins may cause steel prices to rebound slightly in the near future.”
CISA also predicted China exports of steel products would fall sharply in the second half of the year adding to pressure on the sector. It said "Moreover, there are still uncertainties for the economic recovery in the euro zone and Chinese steel exports will fall sharply in the second half of this year putting more pressure on the domestic market."
CISA blamed rising international trade protectionism and the removal of export tax rebate for some steel products earlier this week for the tougher export environment. While exports slow, the domestic market is also gloomy with mills facing a squeeze from two directions steel prices are under pressure from slower growth in China car and building sectors but input costs have not fallen as fast.
CISA said average prices for imported iron ore rose by 8.82%MoM to USD 139.85 per tonne cost & freight in June, while prices for domestic ore, coke and scrap were still relatively high. At the same time, steel production is still growing fast on a YoY basis and high inventories will weigh on the sluggish market.
Inventories for five major steel products in 26 major cities stood at a combined 15.72 million tonnes by the end of June down by 0.4% or 60,000 tonnes MoM.