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China’s steel prices are rebounding recently after sharp declines in previous months, on expectation of rising demand amid the government’s calls for efforts to ensure property delivery in response to a widespread mortgage boycott crisis.
The average prices of grade-three steel rebar (Φ25mm) in China’s 10 major cities stood at 4,208 yuan per tonne on August 1, rising by 8.5% from 329 yuan per tonne on July 15, while the most-traded steel rebar futures contract on the Shanghai Futures Exchange, for September delivery, increased by more than 500 yuan per tonne during the same period, according to data compared by consultancy Lange Steel.
“At around mid-July, steel rebar prices started to rebound and so far have climbed by more than 300 yuan per tonne. The price in the futures market grew even faster,” said a manager at a Chinese steelmaker.
Notably, the China Banking and Insurance Regulatory Commission (CBIRC) called for efforts to ensure home delivery in response to a widespread home mortgage boycott on July 17. Since July 18, China’s most-traded contract of steel rebar futures in Shanghai have rebounded more than 15%, hot-rolled coil 14%, and major steelmaking commodities iron ore up 23.7%, coking coal up 16.6% and coke 17%.
Before that, Chinese steelmakers suffered a sector-wide losses in June and July, prompting many companies to suspend or reduce production to cut losses. Read more …
The average operating rate of blast furnace at the country’s 100 major medium- and small-sized steelmakers stood at 78.8%, falling by 3.6 percentage points from this year’s peak, according to Lange Steel.
The rebounding steel prices is improving market expectation of steelmakers’ profitability. As of August 1, gross profit margin for steel rebar stood at 421 – 348 yuan per tonnes, hot-rolled coil at 231 yuan per tonne, according to estimates by He Jianhui, steel analysts at SDIC Essence Futures, compared to a loss of more than 100 yuan per tonne in mid-July.
“Overall epidemic situation in China has improved and the high-temperature and rainy season is coming to an end, so the worst days for steel demand has basically ended,” said He.
“As infrastructure investment picks up to stabilize the economy, the government steps up efforts to ensure property delivery and the manufacturing sector recovers steadily, steel demand is expected to gradually recover,” he said. “In addition, the steel sector’s production cut in the previous months has lowered steel inventories, which will also help boost steel prices.”
The US Federal Reserve’s latest 75-basis-point rate hike has eased short-term downward pressure on commodities, and meanwhile, steel demand is picking up, steel prices are expected to see rebound and steelmakers’ willingness to resume production is strengthening, said Ge Xin, deputy director at Lange Steel’s research center.