Chinese steel price recovery may be short lived

China Securities Journal reported that market participants are concerned that recent steel price recovery may be short lived since the real steel demand remains slack, although the price rally has extended for ten straight weeks supported by stimulus package and production cut.

As many mills have restarted production in light of price improvement, maybe an overreaction by speculative buyers, which would again put the steel price under downward pressure.

The demand plunge has yet to reverse, and recent price recovery is the result of larger scale of production cut than the demand reduction, which has restored the market balance for the short term. However, the construction activity especially housing market continues to shrink, while many companies have slashed the capital spending significantly for the New Year, which would all suppress the steel demand.

Mr Matao Bohai Securities analyst said down-stream demand may not be that healthy as indicated by the rebounding steel prices. Leading mills have raised up the offer price around Jan in response to the price improvement and they are eager to offset the heavy loss in past months. Meanwhile, trading houses are more willing to restock at the moment. Nevertheless, most are more bearish on long products outlook on back of limited capacity addition and infrastructure oriented stimulus package.

The stimulus package is expected to provide a real demand boost for long products. Therefore, long products price is estimated to held steady or edge upward in days to come.

The steel output grows 15.4% from the month before in December of this, long products output expands 21.8%, while flat products production merely rises 9.97%. Market insiders warn that swelling supply of long products could weigh on prices downward since most sheet producers can readily switch to longs production.

Source: China Securities Journal

• New Development Zone to Take Shape Near Beijing (0)
• Manufacturing maintains growth arc (0)
• Iron Ore Price May Decline By 50 % in 2009 in China (0)
• Economy may grow 10.2% in Q3 (0)
• China imports record volume of iron ore in March (0)
• 48 Major Steel Mills in The Red (0)
• Weak Economy Cuts China’s Ansteel 2008 Net Profit 55% (0)
• The Steel Revitalization Plans in China (0)
• PVC Prices Climbing as a Result of Olympic Effect (0)
• Energy: Steel mills to cut production on slump demands (0)