It is reported that Chinese steel production is booming thus creating an imbalance between the demand and supply and deterring desired increase in steel price.
Some of the factors effecting Chinese steel market are
1. Continued capacity addition
Chinese daily yield of crude has reached 1.7 million tonnes up by 3,300 tonnes as compared to levels in mid October of 2009. The daily production of pig iron touched 1.6 million tonnes up by 1.05% and finished steel products added 80,000 tonnes to go up by 3.99%.
2. Unwillingness for production cut
Due to the marginal profit, Chinese steel mills are unwilling to cut the production, which makes task of inventories reduction difficult if not impossible. Generally, the increase of steel price can cover the rise of cost and the profit of steel mills has little increased as well. Therefore, it is nearly impossible to cut the production recently.
On the other hand, inventories of main steel products reduced under the condition of increasing price last week, which reflects the players’ determination to cut the inventories. However, the HR products increased shows that it still needs time to achieve the real goal.
Overall, over supply is becoming the main factor to affect the steel price. As it estimated, the overcapacity in 2009 will reach 230 million tonnes causing the high inventories and reduction of steel price.