China H2 steel prices likely to fall on overcapacity, association
2009-08-24 11:07:41Steel prices in China started to plunge last week after rising for 17 straight weeks and such price fall was totally attributed to overcapacity, the National Business Daily quoted Shan Shanghua, secretary-general of the China Iron & Steel Association as saying Friday.
Steel prices will go downward in the second half of this year if capacities continue to expand, added Shan.
By August 19, prices of the domestic mainstream steel products had slumped 550-950 yuan/ton or about 20 percent since last week.
However, some market analysts hold that in the usually slack season for steel industry in July and August, the price fall was just a normal adjustment from a sharp rise in the earlier period.
Steel prices are expected to halt dropping in September and steel enterprises' performance in the second half may be better than that in the first half thanks to rising demand from the real estate sector, they point out.
During the period from April to early August, prices of main steel products in China soared nearly 30 percent over this year's valley. An analyst with CBI China said that the government's four-trillion-yuan stimulus package, which was launched in the fourth quarter of last year, began to boost steel demand from the second quarter this year. Therefore, steel enterprises' stocks kept falling in the March-May period and steel prices started rising from mid-April.
"In the June-July period, the domestic steel output grew too fast, far surpassing the market demand," Shan noted. Meanwhile, lots of intermediary traders largely added stocks on speculation that the price would rise higher.
"Now traders begin to sell out their stocks, but market doesn't have so much demand", Shan added.
Statistics from CISA show that stocks of steel products posted a month-on-month rise in July after decline for four consecutive months.
Currently, some steel products' ex-factory prices are higher than spot prices, with the price gap as wide as 1,700 yuan/ton. A researcher with China's leading steel producer Baosteel said that the steel demand from downstream industries are inadequate to support the high price, which will force steel enterprises to cut their prices.
Shan still held unoptimistic outlook for the domestic steel market in the following period, saying that steel prices can hardly go up in the second half if capacities maintain at such a high level.
With price rise of raw materials such as iron ore and coke, the steel production cost is also increasing to squeeze steel enterprises' profits, Shan said, adding that large steel plants' steel businesses still incurred losses in the first seven months and most of their profits came from investment return.
However, according to Ding, steel prices had surged for more than three months, so it's normal for them to slip back. The steel industry will enter the traditional peak season in the September-October period and steel prices have a 20-30 percent rising room, he said.
The CBI analyst predicted that steel enterprises' profits will climb in the second half as steel exports are likely to warm up.
A CBI survey showed that orders for steel products from overseas have increased prominently from June, with the quoted price also on a rise.From:http://www.chinamining.org
Steel prices will go downward in the second half of this year if capacities continue to expand, added Shan.
By August 19, prices of the domestic mainstream steel products had slumped 550-950 yuan/ton or about 20 percent since last week.
However, some market analysts hold that in the usually slack season for steel industry in July and August, the price fall was just a normal adjustment from a sharp rise in the earlier period.
Steel prices are expected to halt dropping in September and steel enterprises' performance in the second half may be better than that in the first half thanks to rising demand from the real estate sector, they point out.
During the period from April to early August, prices of main steel products in China soared nearly 30 percent over this year's valley. An analyst with CBI China said that the government's four-trillion-yuan stimulus package, which was launched in the fourth quarter of last year, began to boost steel demand from the second quarter this year. Therefore, steel enterprises' stocks kept falling in the March-May period and steel prices started rising from mid-April.
"In the June-July period, the domestic steel output grew too fast, far surpassing the market demand," Shan noted. Meanwhile, lots of intermediary traders largely added stocks on speculation that the price would rise higher.
"Now traders begin to sell out their stocks, but market doesn't have so much demand", Shan added.
Statistics from CISA show that stocks of steel products posted a month-on-month rise in July after decline for four consecutive months.
Currently, some steel products' ex-factory prices are higher than spot prices, with the price gap as wide as 1,700 yuan/ton. A researcher with China's leading steel producer Baosteel said that the steel demand from downstream industries are inadequate to support the high price, which will force steel enterprises to cut their prices.
Shan still held unoptimistic outlook for the domestic steel market in the following period, saying that steel prices can hardly go up in the second half if capacities maintain at such a high level.
With price rise of raw materials such as iron ore and coke, the steel production cost is also increasing to squeeze steel enterprises' profits, Shan said, adding that large steel plants' steel businesses still incurred losses in the first seven months and most of their profits came from investment return.
However, according to Ding, steel prices had surged for more than three months, so it's normal for them to slip back. The steel industry will enter the traditional peak season in the September-October period and steel prices have a 20-30 percent rising room, he said.
The CBI analyst predicted that steel enterprises' profits will climb in the second half as steel exports are likely to warm up.
A CBI survey showed that orders for steel products from overseas have increased prominently from June, with the quoted price also on a rise.From:http://www.chinamining.org
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