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May, 23rd 2018

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MAY 14
09:05

Chinese steel steady as production tops out

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Chinese steel prices hovered on Monday as the market still lacked a strong impetus in either direction. Output and inventory data meanwhile suggests strong April demand and a possible end to output increases, Kallanish notes.

On the Shanghai Futures Exchange the October rebar contract closed at CNY 3,667/tonne ($578/t), CNY 8/tonne lower than Friday, while the same contract for hot rolled coil closed up CNY 2/t at CNY 3,769/t.

China’s major steelmakers apparently saw crude steel production top out at the end of April, according to the China Iron and Steel Association (CISA). That should be positive news for prices as any continuing increase in output could run the risk of oversupply.

Over 21-30 April, china’s major steelmakers produced crude steel at an average rate of 1.91 million tonnes/day, down -0.05% from mid-April. Over the same period, mill inventories fell -14.8% to 12.44 million tonnes. That was also down from a reported 13.38mt at the end of March.

Combined with data for market inventories and net exports, this data describes a sharp improvement in end user buying in April. This fits with the Kallanish expectation that demand delayed from March came back strongly in April. Data released Tuesday should confirm this, showing that while Chinese end user demand over January-March was down by more than -10%, over January-April demand was much more stable.