Oversupply likely to cap gains in China steel prices for months: CISA

Steel prices in China are unlikely to rise by much in coming months as the market was set to remain oversupplied due to rising production, the China Iron & Steel Association said in its monthly steel market analysis.

Steel mills ramped up production in April for the spring peak demand season, when profit margins were healthy. However the outlook for growth in property and infrastructure construction was slow for the remainder of the year and this may dampen steel demand going forward, CISA said.

China’s domestic composite steel price index, comprising both long and flat products, retreated slightly in the second week of May after rising steadily from end March to the first week of May, the report showed.

The rise in April was attributed to the strong demand and falling stocks amid the seasonal peak, but oversupply will cap any rise in prices in the months ahead, CISA said.

China’s crude steel output totaled 76.7 million mt in April, up 4.8% year on year. Daily crude steel production hit a record high of 2.56 million mt in the month, up 7.1% from March. However, this significant rise in output was likely to add downward pressure to prices going forward, CISA said.

Steel stocks remain relatively high despite falling for the consecutive sixth week last week.

Stocks held by traders totaled 12.71 million mt last Friday, down 5.28 million mt or 29.4% from end March, but up 4.77 million mt or 60.1% from the start of this year and up 1.37 million mt or 12.1% from a year earlier.

CISA in its report called on Chinese mills to curb production in a bid to ensure market stability.

Source: Platts / Hellenic Shipping News