Jaway Stainless Steel

Chinese steel prices stabilize amidst demand and shortage

July has augured well for the steel market in China after a near wash out in Q2. With punching rally of 1% with whirlwind 2% rally in long product prices the market is colorful in a lackluster season.

Class 01-Jul 19-Jul Change %
CLPPI 7477 7594 117 1.6%
CFPPI 7510 7568 58 0.8%
CHISPI 7496 7579 83 1.1%

CLPPI - Chinese Long Product Price Index
CFPPI - Chinese Flat Product Price Index
CHISPI - Chinese Steel Price Index

Although June proved to be epoch making month with the average daily production touching 1.998 million tonnes per day stocks kept depleting in re-bars and HRC with a matching alacrity. The major consumption zones have been North East and North West in China.

The main factor providing the unusual clink has been
1. Demand for steel for the budget house construction which has to be completed this year. This has led to an inventory built up by the stockiest.
2. At the same time production rationalization by elimination of backward capacity in 18 industries, including target of 31.22 and 27.94 million tonnes of smelting iron and steel.
3. Strong demand from the urbanization and infrastructure sector which has largely gone unnoticed seems to be gobbling the inventory against all odds.

Undeniably the market sentiments have come to still after the bearish run in Q2 a path breaking improvement in prices still eludes the market. Chinese steel market renowned for its mercurial vacillations is still awaiting that ignition which wills ablaze the horizon. With the autumn round the corner and Middle East and EU struggling, some pyrotechnics might be on the cards after Ramadan and summer vacation.

Meanwhile the domestic demand will continue gradual increase with planned targets slated for completion by year end.

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