Chinese steel demand weakens

According to a report by China Metals, prices of thick and medium steel sheets have rebounded in most Chinese cities over the past week with Tianjin, Guangzhou and Harbin all experiencing per tonne price hikes of between RMB10 and RMB80. In Shanghai, prices edged up, due to shortages of certain gauges, and this is expected to continue into next week as foggy weather delays shipping.

A survey by MySteel found that around 65% of respondents expect a consolidation in prices for hot-rolled steel sheets and coils over the next week. The survey also revealed that 27% of respondents expected prices to drop while 9% expected a price hike.

Baosteel will be raising factory prices for January orders across most product lines by between RMB50 to RMB100 per tonne with the exception of colour-coated steel, which will go up by RMB100 per tonne. Electrical steel products will remain unchanged from December, China Metals reports. In fact, Baosteel’s factory prices have remained unchanged since October.

MySteel’s Wang Jianliang said that the company’s price hike means that it has received ‘quite good orders’ and is in bullish mood for early 2014.

Automotive sales and production were both up at 14% and 21% respectively and it now looks as if other steelmakers in China will follow Baosteel’s lead and put up their prices.

Meanwhile, the Ministry of Industry and Information Technology (MIIT) is in the process of developing standards for energy conservation and environmental protection, safety production and CSR, replacing standards issued governing furnace size, which some local governments in China will continue to use to eliminate outdated capacity.

MIIT is actively encouraging mergers and acquisitions among steelmakers in the same provinces as well as ‘trans-provincial’ M&A. It is also developing regulations for steelmakers to trade their capacity quota between one another. So, if steelmaker A buys a certain production quota from steelmaker B, steelmaker B must shutdown the same amount of capacity at its production plants.

China’s Hebei province hosts the country’s 10 most polluted cities and is in the process of cleaning up its act. The provincial government of Hebei has ordered 521 companies (including steel producers) to reduce pollutant emissions. Steel, glass, cement and power generation are the four major polluting industries in China, consuming 167Mt of coal, which equates to 53% of total demand in the province. There were also responsible for 65.4% of total sulfur dioxide emissions, 60.2% of nitrogen oxide and 61% of total dust.

Pollution has been a big issue in China of late with six provinces and municipalities in Northern China – including Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia and Shandong – make strenuous efforts to combat air pollution. Hebei has pledged to cut annual steel capacity by 60Mt by 2017 and reduce annual coal consumption by 40Mt in the same time frame.

Where outdated production capacity was concerned, China Metals reported that 21 industries (including steel) fulfilled 2012 outdated capacity elimination targets. China eliminated 5.51 million kW of power generation; 43.55Mt of coal production; 10.78Mt of iron making; 9.37Mt of steel making; 24.93Mt of coke production; 3.26Mt of ferro alloy; 1.32Mt of carbide; 270kt of electrolytic aluminium; 758kt of copper-making; 1.34Mt of lead-making and 329kt of zinc-making.
Other eliminations include 258.29Mt of cement, 58.56Mt of flat glass, 10.57Mt of paper making and 735Mt of alcohol.

Source: China Metals.