The steel market in China will remain under pressure due to the impact of high raw material prices and the upcoming off-season of consumption in summer, despite the fact that domestic prices for steel products have continued to rise since the second half of April.
This is discussed in the monthly report of the Chinese Metallurgical Association (CISA), according to Mysteel Global.
The association noted the uncertainty in the global economy due to geopolitical factors. Global energy prices have risen sharply due to the outbreak of conflict in the Middle East, and the steady rise in the cost of basic raw materials for steel production and energy reduces the profitability of metallurgy.
If the conflict in the Middle East continues to escalate and crude oil prices remain elevated or rise, the CISA notes, both shipping tariffs and energy costs will increase, which will create additional pressure on the profitability of steel mills.
In addition, the steel market in China is expected to enter the low-consumption summer off-season soon, and end-user demand for steel products may fall with the upcoming rainy season in the south and high temperatures in the north. Which will disrupt construction activities.
CISA warned that the balance of supply and demand could deteriorate again if steel demand declines seasonally and factories fail to adjust their production accordingly.
Therefore, steel producers should closely monitor changes in demand and the latest developments in the Middle East, while continuing to limit production and reduce inventories.
However, the continuation of China's soft monetary policy, combined with accelerated fiscal spending, is expected to provide structural support for steel demand in the country in the second half of this year.
According to relevant documents published at the end of April, China aims to reduce carbon emissions by more than 65% by 2030 compared to 2005 levels, while non-fossil fuel consumption will be about 25%. We are also talking about the need to comprehensively improve energy efficiency in key industries, including the steel industry, CISA notes.
These policy measures have significantly increased market expectations that the production capacity of integrated steel producers will remain limited. This is expected to accelerate the gradual decommissioning of obsolete capacities and help improve the balance of supply and demand in the steel market.
