Chinese steel market sentiment is heavily impacted by the European debt crisis, governmental real estate policy and rising output. Looking forward to the future steel market, there are many uncertainties now:
1. How would the Chinese government handle with the economic growth rate decrease?
Some analysts consider the government will enlarge its investment on the construction of infrastructure, key projects and residential housing in the future if the domestic economy growth rate keeps falling. Therewith, Chinese steel market will bottom out as a result.
2. How will the domestic steel output go in H2?
Statistics show that Chinese steel demand is quite strong this year, however, the price keeps falling later due to the gloomy sentiment and huge crude output. Hence, the domestic crude steel output in the second half of this year will directly influence the future steel market.
Well, Chinese steel output in H2 relies on the electric power supply enterprises performance and the governmental obsolete output elimination in the future which are all absolutely uncertain now.
3. Where will the contract price of iron ore go later?
Although the present domestic price of iron ore decreases to some extent, yet it is still uncertain for the contact offer. Actually, the global big miners pay much close attention to the real demand instead of the steel price trend.
It is reported that the global crude steel output jumped a lot in the first five months of this year, which will of course push up the demand of iron ore. Besides, those big miners still hold the pricing power as they are in control of 80% of the global iron ore resources and 70% of the global ocean trading volume. Chinese steel enterprises may face with real high cost in H2.
4. When will bottom fishers go back to the market?
By now, all the steel insiders are holding a wait-and-see attitude as for the weak sentiment and uncertain economy for both China and US. Speculators generally believe there is still room for steel price fall. Hence, they would not prefer to pour their bottom fishing cash into the market. Nevertheless, traders should be much cautious once the spot market prices decline further.
5. Hot money swarms into China cosmically adding fuel to the fire.
The international hot money keeps entering China under the anticipation of Chinese RMB appreciation. That money mainly swarms into Chinese real estate, stock and future markets, adding pressure to the steel market fluctuation.