While steel demand in China is expected to improve towards the end of the year, the current position is that steel prices are falling because of a weaker macro economy and a ‘deeper supply glut’, according to China Metals, a Xinhua News Agency publication.

Mass infrastructure construction projects are set to kick off later this year and projects surrounding urbanisation, environmental protection and so-called ‘belt and road’ initiatives are making steady progress. With these factors in mind, steel demand is expected to improve as the year continues.

That said, increased trade frictions will make steel exports from China more difficult and lead to a greater supply glut and crude steel production is likely to shrink further during August and September after a 7.58% decline in July’s daily production.

The Complex Steel Price Index (CSPI) compiled by MySteel, is expected to drop to 62.73 by end July, down 5.94% month-on-month, a decline bigger by 0.78 percentage points than in end-June and 31.96% lower on a year-on-year basis.

Price declines in all eight steel products monitored by the China Iron and Steel Association are expected for end-July figures including big losses for hot-rolled coil, cold-rolled thin sheet and galvanised sheet.

Steel demand has been curbed by a deflated macro economy – fixed asset and real estate investment down – and China’s iron and steel output has continued to decline when examined on a year-on-year basis.

Pig iron output was down 4.8%, crude steel down 4.6% and finished steel down 1.9% according to the National Bureau of Statistics and China’s daily crude steel output was down 7.6% at 2.1Mt.

China exported 9.73Mt of steel in July and imported 1.05Mt. Apparent consumption of crude steel was down 6.7% from June (to 56.83Mt) but was 3.1 percentage points higher than crude steel output.

Imported iron ore prices were up 7.6% in July when compared with June figures, but other raw materials prices slipped. Homegrown iron ores were down 8.83%, coke prices were down 4.7% and scrap steel dropped 9%.

A significant rebound in steel prices later in the year is unlikely, it is claimed. A limited range of fluctuations should be expected, says China Metals.