The costs of steel production in China remained high in February as iron ore stocks previously purchased by steel mills had already been half consumed. A new round of iron ore restocking will begin, which means iron ore prices are likely to rise.

A price hike for steel on the spot market and strong support from raw materials costs stimulated steel production with crude steel output growing 9.8% compared with February 2012 to 61.8Mt.

The downstream demand for steels is expected to gradually recover after March and de-stocking is expected to occur which will help reduce the pressure of oversupply.

Some industry insiders said that low sales margins, an electricity supply gap, and targets of eliminating obsolete steel capacities nationwide would combine to limit steel production. Therefore, it seemed unlikely that steel output would increase much.

Source: China Metals e-mail