Steel prices in China fell in September

After stabilizing amid tentative optimism in August, Chinese steel prices are likely to weaken again in September, Wang Jianhua, chief analyst at Mysteel, predicted in his monthly forecast, noting that increased supply will be the main pressure.

As spot and futures steel prices rebounded in August, about 62% of 247 steelmakers in China surveyed by Mysteel said they made money within a month, Wang said, prompting factories across the country to actively resume production.

Between August 19 and 25, the daily throughput of the 247 steel mills included in the sample reached about 2.3 million tons per day, indicating a sharp increase of 158,200 tons per day compared to the last week of July. This is also 6,400 tons/day more than in the same period last year.

The survey also showed that these steelmakers plan to resume production at another 20 blast furnaces next month, which would increase total pig iron production in September by 4.5-5 million tons compared to August, according to Mysteel estimates.

Wang warned that a permanent rebound in steel mill production would likely trigger an oversupply of steel, putting more pressure on an "already fragile market." However, he also noted that steel mills are not yet ready to abandon the increase in production.

“As long as profit margins are maintained, steel producers would like to maintain stable production, especially during the peak steel demand season in September,” he explained. Therefore, some increase in the supply of steel seems inevitable.

Meanwhile, demand for steel was sluggish in August and shows no signs of recovery next month, Wang said, although steel for use in infrastructure construction and manufacturing is expected to pick up slightly as the summer heat wanes.

For example, the total area of ​​residential property sold in the 30 cities in China monitored by Mysteel fell 8% m/m from August 1 to 25 and 21% year-on-year to 9.4 million sqm. real estate development will remain weak.

In terms of macroeconomic indicators, on August 22, the People's Bank of China held a meeting with local financial institutions to discuss an increase in lending, and the State Council also announced on August 24 that it is strengthening the policy package to stabilize the economy by stopping lending. special bonds, as reported.

“This indicates that previous policies were not strong enough to stimulate the economy, and at the same time, it is difficult for new measures to take effect immediately,” Wang said, suggesting that strengthening macroeconomic policies is unlikely to increase steel consumption.

In this scenario, overall inventories of key steel products such as rebar, wire, coils and plates at steel mills and retail warehouses are expected to pick up slightly in September, further weighing on steel prices, he predicts.

“Under pressure from weak fundamentals and macroeconomic concerns, steel prices in China could fall in September,” Wang concluded, reiterating that prices have little chance of recovery if steelmakers fail to contain the resumption of production.