The China Iron and Steel association said on tuesday , in its monthly steel market analysis research that Steel prices in China are unlikely to rise by much in coming months as the market was set to remain oversupplied due to rising production.
Steel mills ramped up production in April for the spring top demand season, when profit margins were good. But the outlook for growth in property and infrastructures constructions was slow for the rest of the year and it may weaken steel demand going forward, CISA said.
According to the report, China’s domestic composite steel price index, comprising both long and flat products, retreated slightly in the second week of May after rising steadily from end March to the first week of May.
The rise in April was caused by the strong demand and falling stocks in the middle of the seasonal peak, but oversupply will limit any rise in prices in the upcoming months. China’s crude steel output totaled 76.7 million mt in April, up 4.8% year on year. Daily crude steel production hit a record high of 2.56 million mt in the month, up 7.1% from March. However, this remarkable rise in output was likely to add downward pressure to prices going forward, CISA said.
Steel stocks stay relatively high despite falling for the consecutive sixth week last week.
Stocks held by traders totaled 12.71 million mt last Friday, down 5.28 million mt or 29.4% from end March, but up 4.77 million mt or 60.1% from the start of this year and up 1.37 million mt or 12.1% from a year earlier.
CISA in its report called on Chinese mills to curb production in a bid to ensure market stability.