China Steel Market "Needs Cut In Output"

The General Manager of Shanghai Baoxia Metal Co has saidn that contunuing falling prices of construction grade steel products like rebar and wire rod have made operators puzzled about the future of the market. Mr He Yonghua said that the steel market was not likely to warm up without mills' production cuts.

He considered that it was not easy to analyse the market trend for construction grade steel products this year at this moment, however, the growth in output exceeded that of demand. Thus, oversupply would run through the whole year, leading to a stiff situation for steel market with weakening demand and rising resources.

Mr He said "The root for rebar price decrease since Spring Festival in Shanghai is the unbalance of supply and demand". He noted that stock by 0.6 million tonnes. It is known that the price of construction grade steel products prices has bottomed out since last November, hence steelmakers have instead turned to producing rebar.

Furthermore, the demand of construction grade steel products were heavily impacted by New Year and the Spring Festival holiday as well as more than 15 rainy days since February. Rebar price has tumbled and the market price dropped to CNY 3200 per tonne on March 3rd with some transaction prices at CNY 3170 to 3180 per tonne. It could possibly fall to CNY 3000 per tonne..

He figured that the price rebound of construction grade steel products was mainly based on plants' efficient control of their production capacities, especially for rebar. He added that "Yet, it is not easy to control mill's production release. Mid-and-small steelmakers would rush to produce products as soon as the market price edges up little. Of course, the price would fall back again or even be much cheaper later on just as the iterative rebar price drop only happened in one day on Shanghai market.”

He said "The market in the H2 is expected to be relatively better than the first quarter of this year for China's stimulus package, which will take some time to reveal its value. In general, the best way to propel steel market at this very moment was to slash production actively.”

Source: Steel Guru