China's steel market might face both increased supply and higher demand during the current July-December half compared with H1, according to a September 16 release by the China Metallurgical News (CMN) reporting a conference held earlier by China Iron and Steel Association (CISA).
This half will likely be characterized by high steel stocks, despite downward corrections, and the industry's profits would decline but stabilize gradually, CISA said, portraying a better market outlook than in January-June.
In H2, domestic steel demand will be stronger than in H1, even though the growth rate might slow down, leading to a slight overall rise in demand for the whole year, He Wenbo, CISA's party secretary, stated at the conference.
He pointed out that the current trend showing production picking up more strongly than consumption - leading inventories to rise higher than normal levels - will remain for some time, but stressed that this deserved attention, not panic.
"What level of stocks is appropriate for China's steel market with nearly 1 billion tonnes of steel?" he wondered. "Undoubtedly, we should be disciplined in releasing new productive capacity based on market demand, and this is necessary for a healthy supply-demand relationship," he added.
"In recent years, new capacity has been brought on stream at a faster pace than outdated capacity was being scrapped," CMN quoted He as saying. "This has threatened the healthy development of the industry and affected market expectations, and though the robust demand is real, the risk of accumulation exists too," he warned. He noted however that China has been promoting the revision of the policy regarding the addition of new facilities.
China Metallurgical News commented that the widely held belief among attendees at the conference was that China's steel market is facing several major challenges. The spread of COVID-19 in overseas markets continues to threaten economic recovery and risks sending global prosperity temporarily into reverse, CMN reported, noted that all these factors are creating uncertainty in the market.
Meanwhile, the costs for producing steel for the Chinese mills have kept rising, as the short supplies of raw materials have not been fully mitigated, namely restrictions on coal production in some regions such as East China's Shandong province. These have affected coke production and further supported coke prices to rise, it said.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
Photo: World Steel