China’s Nov steel prices have room for inclines

Posted on 04 November 2020

Chinese domestic steel prices may still have room to increase within this month as the growth in demand may outpace that of supply, Wang Jianhua, Mysteel’s chief analyst shared his near-term market outlook on October 30.

For November, the weekly production of the five major finished steel products may ease further to 10 million tonnes/week with the production restrictions for winter and probable annual maintenance initiated by steel mills after having operated at full capacity for most of 2020, Wang predicted. In October, their weekly output eased by 277,000 tonnes/week to 10.66 million tonnes/week, according to Mysteel’s related survey.

This month, domestic inventories of the five major steel products comprising rebar, wire rod, hot-rolled coil, cold rolled coil and plate, may decline by 4 million tonnes on month, with stocks in some regions or those of certain products facing possible supply tightness from the anticipated better demand, Wang added.

Steel consumption showed signs of robustness in October, as the daily trading volume of construction steel in China averaged 242,689 tonnes/day over October 1-27, up 7.7% on month or up 28.4% on year, indicating that the demand from infrastructure and property construction inclined further on month, and Wang expects this to continue in November.

This month, steel demand from the domestic automakers may continue to grow, and the country’s auto production may reach 2.5 million units. Online sales and exports of electrical home appliances may surge too, leading to robust demand for flat steel, he highlighted.

China’s auto production may accelerate in pace further to realize the projected 4% on-year decline in the aspect for the whole 2020, as over January-September, the total volume still dropped 6.1% on year to 16.5 million units, according to the latest data from the country’s National Bureau of Statistics, Mysteel Global noted.

In the macro sense, new orders and finished product inventories in the Chinese manufacturing industry have been developing positively, and the momentum will probably stay for November, according to him. The country’s manufacturing industry enjoyed faster growth in new orders than in production in September, he noted.

By September, the Chinese manufacturers’ raw material procurement sub-index was in expansion while the finished products inventories index was in contraction, indicating that the producers were in the stage of passive de-stocking because of better demand, he added.

A similar situation emerged in October too, as shown by the Purchasing Managers’ Index (PMI) for the manufacturing industry released on October 31 where both the PMI and the production sub-index remained largely stable on month, both down 0.1 basis point, while both imports and exports improved, up 0.4 and 0.2 basis points respectively on month, as reported, and the finished product inventories fell 3.5 basis points on month to 44.9.

Besides, the key elements in the national economy such as the privately-owned enterprises saw their PMI edge over the threshold of 50 in September and return to the expansion zone, scoring 50.1, Wang noted.

Source : Mysteel Global