The steel price rebounded in China since the end of October and the total increase so far is about 8%. It is predicted that the rebound may continue for a while as the mail reasons behind it are the strengthened demand and increasing costs.
1 Demand strengthening
The downstream industries are increasing the investment and thus acquiring more steel products. The apparent consumption of steel products registered at 500 million tonnes in the first nine months, up by 21.8% YoY. And the increase was 30% in the third quarter. Along with economic recovery, the increase of GDP in China may be 10% in fourth quarter, which guarantees the high demand of steel products. At the same time, the steel capacity is in its peak after a long time releasing. The increasing speed is in a limit.
2 Increasing costs
Cost is another factor influencing the change of steel prices. Chinese steel cost may have a large increase in the coming period mainly due to devaluation of dollar, increase of fuel price and the price of iron ore in long term negotiations for next year pushing the spot prices up. In addition, coal price is increasing in both international market and domestic market. This may cause the rise of steel price as well. On the other hand high steel inventories in China are playing down havoc with prices
But, as per some market reports, Chinese steel market is starting to cut inventories of domestic construction steel, led by Shanghai market, which may balance the demand of supply in Chinese steel market. Up to last week, the total inventories of rebars were 0.63 million tonnes, WRC was 0.12 million tonnes. That is to say, inventories of construction steel in general reduced to 0.75 million tonnes. The continuing reduction of rebars inventories helps the recent increase of steel price.
Overall, the pressure of inventories and high production is still deterring the rebound of Chinese steel price and thus the pace of rebound will be slow.
