Steel prices in China will remain constrained in the near term

Steel prices in China are likely to remain limited in the short term after rising in November. This is evidenced by the latest monthly report of the China Iron and Steel Association (CISA), SteelMint reports.

In its forecast, CISA cites the onset of the off-season for steel consumption due to the winter season. Demand for steel products from the construction and manufacturing sectors may decline as temperatures drop. However, although steel production continues to fall, it still falls short of market expectations, which could exacerbate the imbalance between supply and demand, the association noted.

In the first ten days of December, daily steel production at CISA member steel mills averaged 1.93 million tons, down 4.2% from the end of November or 2.8% from the same period last year.

In addition, steel stocks in traders’ warehouses continued to decline, while the volumes held by domestic steel producers showed signs of accumulation. This indicates the inactivity of traders and puts additional pressure on domestic steel prices, CISA warned.

As of December 10, stocks of the five main types of steel products – rebar, wire rod, hot and cold rolled coils and sheet steel – in 21 Chinese cities monitored by CISA amounted to 7.37 million tonnes, down 2.4% from the end of November. Meanwhile, the stocks of the five main types of steel in the warehouses of the association’s member companies amounted to 14.1 million tons, which is 8.8% more than in the same period last year.

At the same time, CISA noted that the rapid rise in prices for steel raw materials could put more pressure on steelmakers’ costs, as steel price growth has slowed. As of mid-December, prices for locally produced iron ore concentrates rose by 2.8% compared to the end of November, while prices for coking coal and coke increased by 3% and 4.3% over the same period.

As GMK Center reported earlier, Chinese steel companies reduced steel production by 3.8% year-on-year – to 76.1 million tons in November 2023. Compared to November 2022, China increased steel production by 0.4% in the same period. Average daily steel production in November amounted to 2.54 million tons, the lowest since December 2022.