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Steel inventories exerting downward pressure on prices in China- 08 Jun 10

Recently, china’s steel market is depressed by both weak demand and surplus supply, with serious price inversion, but iron ore price is more likely to rise. Under multiple pressures, China’s main steel agencies all believe that the June steel market is hard to find its way out of the adjusting stage. Although the downward space is limited, it is quite likely that steel price will fall again in late June, duet to the current cost and demand relation.

The second round of destocking is coming

On the one hand, China’s domestic steel production is continuously hitting new highs; on the other hand, downstream demand in April was falling rather than growing. The two factors result in the second round of high stock since the beginning of the year.

According to Usteel statistics by the end of May, steel stock in Chinese market is still quite high. The steel gross of five major species like thread, wire, cold roll, hard roll and plate is approaching 16m tonne. Last year, the real demand is lower than the apparent consumption, and huge stocks are accumulated. This year, the consumption level is still low, and quite some steel mills are asking agents to increase orders, as exports fall. So, the overall steel market will still be under high pressure in the later period.

Steel price June may go downward again

Nowadays, industry insiders share the same belief that the performance of Chinese steel industry in June can be quite unsatisfactory. Although there are a lot of uncertainties in June, a comprehensive analysis of all factors shows that steel price still has a downward space of five to ten percent, but it is a slow fall rather than a price crash. If the market performance of June shall continue, the third quarter loss is then s foregone conclusion.

Jun 8, 2010 09:37
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