Steel market in China is preparing for a strong spurt in the summer

Steel demand in China will significantly surpass last year's levels from mid-June to mid-July, driven by robust iron ore prices and growing strong demand after the Covid-19 restrictions were lifted earlier this year.

However, according to market participants, high production and import volumes along with rising raw material prices are key risks to the forecast.

Downstream demand is generally high from March to April, but weakens between mid-June and mid-July due to the onset of the rainy season in south and east China and high temperatures in the north.

Hot rolled coil prices in Shanghai soared 450 yuan /t ($ 63.60 /t) from the beginning of April to yen 3,650 on June 8, while rebar prices in Shanghai rose by 220 yen /3,620 yen for the same period.
Rebar demand is likely to be supported by an increase in new projects in the Chinese real estate sector from the second quarter. Real estate was the latest of the sectors that are fueling steel demand in China to resume after Covid-19.

"Output will remain strong from mid-June to mid /late July, however margins in steel are likely to narrow due to higher raw material costs," the trader added.

Members of the China Iron Ore and Steel Association (Cisa) produced an average of 2.0925 Mt /d of steel from May 21 to May 31, up 0.6% from May 11-20 and up 4.4% from a year earlier, Cisa reported.

This was the second-highest record level after 2.1049 Mt /day in mid-September 2019. Cisa's data includes over 100 of the largest steel producers in the country. Mills also cut steel inventories, which rose to record levels between February and March.

“Domestic demand for rolled steel in China is good, but with a decline in export demand, overall steel demand in China may fall by 4% compared to last year,” said a Chinese analyst. "Domestic steel production will continue to fluctuate at high levels."