Chinese steel market set to weaken in July amid rising inventories: Platts Analytics
Prices, new orders down in July
Rebar margins below breakeven
Manufacturing activity affected by the pandemic
Chinese steel orders, production and prices are all expected to weaken this month, while inventories will continue to rise due to the weaker seasonal time of year, according to market expectations for China. steel in China from S&P Global Platts Analytics for July.
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New orders, production and pricing were rated two out of five for July, while inventories were rated four out of five. Scores range from one (lower) to five (higher) to determine likely market trends over the coming month.
July may be one of the weakest months of the year for steel demand in China, as seasonal warm and rainy weather dampens downstream activities, such as construction.
This was compounded by tighter credit conditions and deteriorating sentiment, which have already weighed on demand and prices for steel.
According to Platts Analytics, domestic rebar margins in China averaged $ 30 / t in June compared to $ 149 / t in May and were below breakeven in the last week of the month. Domestic hot-rolled coil margins averaged $ 62 / mt in June, compared to $ 155 / mt in May. Margins deteriorated due to lower prices for finished steel and high prices for iron ore and coking coal.
Steel production could decline slightly in July but is expected to remain robust, with weaker downstream demand leading to higher steel inventories.
Hot-rolled steel inventories reached 3.78 million tonnes on June 24, down from 3.5 million tonnes a month earlier, according to data from the China Iron & Steel Association.
Reinforcing bar inventories stood at 7.63 million mt on that day, up from 7.47 million mt about a month earlier.
On the end-user side, manufacturing activity weakened in June with the pandemic dampening demand in China and abroad, although falling steel prices helped ease inflationary pressures from consumers. costs.
The “official” manufacturing purchasing managers index released by the National Bureau of Statistics fell to a four-month low of 50.9 points in June, from 51 in May. Production was also at a four-month low, while export orders fell for the second month in a row.
The PMI compiled by Chinese media company Caixin fell to 51.3 in June from 52 in May. In its report, Caixin noted milder overall conditions and said ex-factory prices had risen at the slowest pace since February despite the high costs of materials such as steel.
Any slowdown in manufacturing would be a concern, as the sector is expected to help offset slowing demand for real estate and infrastructure in the second half of 2021.
Data from the China Electricity Council shows that consumption in the ferrous sector peaked this year at 56.9 billion kWh in May. A drop in June and July would indicate that steel production has finally started to decline.