Traditionally, Chinese downstream sectors’ demand for steel products shoots up when the weather turns warm but this year, after the Spring Festival holiday (February 9-15), the situation in steel market failed to do so. Recently China’s steel demand has failed to meet expectations.

The China Steel Price Index (CSPI) composed by Mysteel.com has continued its weak performance. During the first week in March, steel demand from downstream sectors did not improve significantly. Meanwhile, affected by macroeconomic factors, rebar on the Shanghai Futures Exchange (SHFE) also underperformed, weighing on the mood of steel traders on the spot market.

Prices of steel plates are expected to continue to show weak performance. So far, the prices of medium and thick steel plate have declined for 11th consecutive trading days in March. Demand from the household appliance industry has not ramped up significantly. Worse still, some end users have even delayed their purchase plans while steel prices are moving downwards.

After the continuous decline, steel prices will have limited leeway to drop further. On the construction steel market the price decline has slowed down but market sentiment remains low. Given that costs of raw materials, such as iron ore, remain high, steel traders are also reluctant to make large price cuts.
Steel prices will continue their weak performances in the short term due to waning demand and increases in social stocks of steel products.

According to Mysteel.com, social stocks of major steel products, including rebar, wire rod, hot-rolled steel, cold-rolled steel and heavy and medium plates, rose to 21.75Mt in the week ending March 1, up 6.7% from the previous week. Stocks of the major steel products are 2.93Mt higher than those in March 2 of last year. And stocks of rebar have increased for the 14th straight week by March 1 to more than 10Mt.

Despite this, crude steel production grew by 9.8% in February 2012 compared with February 2011, to 61.8Mt according to worldsteel statistics.

Source: China Metals e-mail chinametal@xinhua.org