Steel prices declined again in the week of May 7-11. By May 11, price of the 25mm rebar in the domestic market averaged at RMB 4289/t, ($677.6) down RMB 74/t over May 4; and price of 6.5mm high speed wire rod stood at RMB 4344/t ($686.3) down RMB 76/t from that on May 4.

By region, steel prices in Shanghai declined by around RMB 50/t in the week, while those in Beijing dropped by about RMB 80/t.

In the January-March period, steel investment and output continued to expand, although at a slower pace, despite warnings issued by the China Iron and Steel Association (CISA) earlier this month that overcapacity has already undermined the sector’s profitability. Fixed-asset investment in the steel sector rose 10.8% from a year earlier to reach RMB86.1bn ($13.6bn) in the first quarter, according to NDRC data.

The recovery in production output, however, contrasts slowing demand growth and a correction in the country’s steel product prices, signalling an expanded imbalance between supply and demand. Steel mills in the country are expected to release their production capacity in coming months as the weather continues to warm, and demand on iron ore will likely weaken, noted the CISA.

Source: China Metals e-mail