The Chinese coal industry website, Chinamining, reports that China's steel product market has seen a large year-on-year inventory growth at the peak season of sales, signalling demand hasn't improved substantially or outperformed anticipation.
According to statistics of steel products inventory in some cities given by My Steel, a website offering complete information about China's steel industry, the inventory of hot rolled plates increased 42% on year by the end of May, that of medium and heavy plates up by 26% and that of construction steels up by 10%.
Statistics released by the China Iron & Steel Association show that China's apparent consumption of steel products reached 170.65 million tons in the first four months of this year, up 10.95 million tons or 6.86 percent over the same period of last year.
According to Mr Xu Xiangchun, an analyst with My Steel, the over 10 million tonne growth of steel products inventory reflects that the new production capacity hasn't transformed into consumption, thus leading to more inventory.
The domestic price of steel products has been climbing for six weeks. Domestic major steel enterprises have lifted ex-factory prices of their products by CNY 150 per tonne to CNY 350 per tonne.
Analysts hold the upward adjustment of steel price will ease the pressure of losses, but the possibility of a price plunge cannot be ruled out if the inventory continues to rise.
Local governments are adding support to steel enterprises. The city of Wuhan, in central China's Hunan province will offer CNY 20 per ton subsidy for direct purchase of Wuhan Iron and Steel Corp.'s products.
Source: Chinamining/Steel Guru
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