top of page

Steel demand to aid prices as winter idling ends: Jefferies

Seasonal steel demand in China will absorb additional steel production, supporting steel prices, investment bank Jefferies said.

Jefferies’ views may boost expectations for imported higher grade steel raw materials demand. This is based on stronger indicative steel margins aided by higher steel prices and steel supply lags this year accelerating utilization at existing furnaces.

Steel mill spreads tracked by S&P Global Platts had weakened last month, especially for rebar, due to higher costs of imported raw materials and weaker steel prices.

Beijing’s policies to curb steel industry operations and aluminum output over the winter to reduce pollution, disrupting typical operating and stock conditions, are turning into steel price drivers, the bank said.

As local mills restart in the spring after winter curbs, the bank expects inventory levels may be too low, and lags to rebuild supply to meet higher demand may mean there is upside risk to steel prices, analysts led by Seth Rosenfeld said in a report.

“Extended lead-times to restart idled furnaces, efforts to extend production controls at least until March 31, and ongoing policies to permanently shutter blast furnace capacity,” may be expected, it said.

The potential constraints to supply contrast with the bank’s expectation for Chinese steel demand to grow 25%, or 13 million mt in March from February, and further 1% month-on-month growth in April.

“Seasonal demand will more than outpace supply growth, and with an insufficient inventory buffer available, price risk is to the upside,” Jefferies said.

“While Chinese steel demand is seasonally weak during winter, production curbs have depressed the scale of normal inventory build, which subsequently provides a necessary ‘buffer’ to meet demand as construction picks-up post Chinese New Year.”

Chinese finished steel inventories are 24% below year-on-year levels, and the fall in rebar inventories is more acute, at 34% below levels in 2017, the bank said.

Jefferies expects Chinese steel exports to continue to fall.

China’s January steel exports fell 37% on January 2017, and were 18% below December 2017 levels, falling to their lowest levels in nearly five years.

“We believe exports could continue to fall in the coming months, aiding global steel markets.”

Source: Platts

Recent Posts

See All


bottom of page