The China Iron & Steel Association (CISA) showed confidence in an industry wide turnaround by the first half of 2012 as profit returned in March as demand improved, amounting to a combined sector profit of RMB 1.77bn ($231M).

Steel prices in China are likely to inch up in coming months as both demand and supply rise, according to a report released by CISA on April 18.

CISA predict that the demand would rise further in coming months and supply would grow as steel makers restart production capacity.

Despite rising demand excess supply capacity is likely to result in steel prices improving only marginally. The comprehensive steel price index rose in March for the first time in the past seven months, up 2.29% month on month to 121.18. The index maintained its upward momentum in April, reaching 121.82 for the second week of April.

In addition to the rising demand in March, the increase in steel prices was also due to sluggish supply to the domestic market, which caused only a modest increase in steel output but a sharp increasing in steel exports.

The market also gained confidence from the falling steel stocks. By the end of March, the stocks of five kinds of steel products in 26 key Chinese steel markets fell 5.55% month on month to 17.89Mt. A factor further pushing up steel prices was the easing liquidity in March as new RMB loans soared month on month.

Source: China Metals e-mail