China Steel Market Meets The Challenge
Domestic steel market has turned to stabilize from slump since late February
. Currently, demands for steel in the peak season keep augmenting, raw materials prices running at high level, steel social inventory declines clearly and the capital liquidity increase, as a result, steel prices still have momentums to ascend. However, confined by the fast growing capacity and shrinking demands, downturn risk of steel prices still exists.
Production Costs Running Highly, Prop Up Steel Price
National Development and Reform Committee (NDRC) announced to regulate up prices of gasoline, diesel oil both by CNY 600 per tonne since March 20, 2012, the second time for oil prices to be enhanced, and prices of diesel oil and gasoline increased severally by CNY 0.51 and CNY 0.44 per tonne.
Price of 97# gasoline increased to CNY 8.44 per tonne from CNY 7.93 per tonne.
Besides, the Chinese government increased iron mine's resources tax from CNY 9 per tonne to CNY 12 per tonne; iron ore imports prices hover at high level all the while because of the monopoly of mines overseas; enterprises' financing diffuculity increasing as well as employees' salary, all of which will compel steel prices to climb up.
Steel Inventory Continues Decreasing, Market Pressures Reduce
Entering into April, steel inventory has remained decline tendency for consecutive six weeks. Current steel social inventory in domestic 26 major markets totaled 17.75 million tonnes, down by 6.25 percent or 1.18 million tonnes from that in February. Among which, rebar and wire rod inventory decreased severally by 4.73 and 13.70 percent; HR and CR inventory down by 7.02 and 5.53 percent separtely; medium plate inventory declined slightly by 1.41 percent, all compared to last month.
Monetary Policy Release, Capital Liquidity Increase
The government this year continues to implement prudent monetary policy with releasing loan size. The capital liquidity in the short run is predicted to increase.
Crude Steel Exports Increase, Supply and Demand Contradiction Remit
World crude steel production for the 59 countries reporting to the World Steel Association (worldsteel) was 119 million tonnes in February 2012. This is 1.9 percent higher than February 2011.
Current CRU global steel price index hit 199.9 points, increasing by 7.0 percent or 13.1 points while domestic steel price index was 121.28 points, with a difference in price of 78.62 points, the enlarged price difference pushed forward domestic exports.
Nevertheless, although domestic steel market is welcoming the traditional boom season, steel prices will still fluctuate slightly later, due to the rapid growing capacity, the decreasing demands both at home and abroad.
Global Macroeconomic Uncertainty Has Been the Biggest Obstacle in Steel Price Hike
Consumer spending is still too weak to ensure a healthy pace of economic growth, Federal Reserve Chairman Ben Bernanke said. In Europe, the substantially drop of manufacturing index confirmed the gliding economy growth of European economies.
Domestic Steel Supply Still Exceeds Demand
According to related statistics, domestic crude steel output totaled 171.64 million tonnes with a year-on-year growth of 1.02 percent; pig iron was produced 163.52 million tonnes, up 3.07 percent; steel products output hit 215.79 million tonnes, up 3.73 percent over prior year. In January, crude steel average daily output achieved 1.83 million tonnes, and 1.927 million tonnes in February, and in March, the output gained 1.904 million tonnes.
Demands for Steel Maintain Downtrend
Steel supply spreads rapidly, while demands both at home and abroad shrink continuously. Consequently, the economic slowdown cut down consumption of steel products.
To sum up, the instability of world economy may lead to volatile demands and domestic slack demands from downstream sectors fail to keep pace with increasing steel output, all of this will hinder steel price increase. However, along with the high production costs and the increasing international steel prices which will prop up steel price hike, recent steel prices will maintain fluctuation in a dilemma.
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