China Steel Market Review & Forecast

Prices - Prices of major steel products

Rebar HRC

Price changes around Spring Festival (SF) in past decade

Price changes around Spring Festival (SF)in past decade

Influencing factor: Steel production

Crude steel production

During January-November, 2016, China's crude steel output was 737.44 million tonnes, up by 0.17% year-on-year;daily output stood at 2.21 million tonnes in November, declining marginally by 0.01% from one month before.

Crude steel production

Mysteel forecast on production

Affected by the spreading environmental protection moves in 2016, and coupled with the events like Tangshan International Horticulture Exposition, 40-year Memorial Day of Tangshan Earthquake, and G20 Summit held in Hangzhou as well as the successive inspections on illegal capacities, China’s average daily crude steel output volume showed negative growth in most time of the year. In December, the daily crude steel output volume stood at 2.18 million tonnes, with a month-on-month growth rate hitting at 0.33%.

Mysteel forecast on production

Mysteel survey of steel mills' capacity utilization rate (weekly)

Capacity utilization rate of long steel products edged upward since the beginning of 2016 and peaked in May; while after that, the index started to step downward, hammered by China’s environmental protection moves and various capacity cut policies. At present, the index was slightly lower than that in the same period one year before.

Mysteel survey of steel mills' capacity utilization rate (weekly)

Key steel mills' finished steel inventories in 2016

Steel mills' average inventory arrived at 13.32 million tonnes in 2016,2.32 million tonnes lower than the same period last year. Major steel mills' inventory did not exceed 15 million tonnes in the whole year, posting a notable decline from one year before.

Key steel mills' finished steel inventories in 2016

Rebar production cost and profit

Rebar production costs eyed gradual upswing trend since January 2016 and has surged to over 3,000 yuan/tonne at present. Meanwhile, benefiting from the supply-side reform and stimulated by strong demand, steel mills’ profit margin was substantially enhanced, with the figure hitting at around 200 yuan/tonne currently, and the highest at 800 yuan/tonne in April.

Rebar production cost and profit

HRC production cost and profit

HRC production costs soared all the way in 2016, and stand at around 3,500 yuan/tonne currently. But, due to the declining year-on-year output, HRC steel makers’ profits seemed better than one year ago. At present, HRC profit margin was estimated at around 400 yuan/tonne, with the peak level recorded in April at 800 yuan/tonne.

HRC production cost and profit
Influencing factor: Steel distribution
Steel price trend in past decade
Q4 avg price VS Q1-Q3 avg price in past decade

Peak-bottom gap of Myspic common-carbon steel price index (yuan/t)

Peak-bottom gap of Myspic common-carbon steel price index (yuan/t)

Peak-bottom gap of major steel product prices in 2016 (yuan/t)

Peak-bottom gaps of major steel product prices in 2016 (yuan/t)
China steel inventory growth before
and after Spring Festival during 2013-2016
Growth rate=(inventory in 1st week after Spring Festival-inventory in last week before Spring Festival)/inventory in last week before Spring Festival. Mysteel data shows that growth rate of inventory kept rising in the past four years and recorded a new high in 2016 at 18.58%.
China steel destocking before and after
Spring Festival during 2013-2016
Destocking rate=(yearly average inventory - yearly average inventory one year before)/ yearly average inventory one year before. Data shows that the destocking rate decreases year by year during 2014-2016; the rate decreased to 18.62% in 2016.

Inventory of steel products before Spring Festival Unit: 0'000 t

Inventory of steel products before Spring Festival

Regional proportions of construction steel trading

A survey of 237 traders shows that east China accounts for the biggest share of 47% in naitonwide steel trading volume, followed by south China of 16%, and central, southwest China of 10% each.

Regional proportions of construction steel trading

Mysteel construction steel trading volume monitor

With Spring Festival drawing near, transactions on spot market is anemic, but in the whole year, trading activities were more active than one year ago, stimulated by bullish factors like environmental protection and capacity elimination. Steel inventory is likely to pick up in large range after Spring Festival due to weak market demand.

Mysteel construction steel trading volume monitor
Influencing factor: Steel exports

China steel exports in 2016 (by product type)

During January-November 2016, China exported 100.7 million tonnes of steel products, down by 1.04% year-on-year.

By product type, except for plate/coated steel which saw obvious rise in exports, most other products eyed flat or negative growth, like railway steel and cold-rolled thin wide strip.

China steel exports in 2016 (by product type)

China steel exports in 2016 (by country)

Steel export destination countries remained largely the same as years before: SEANs and east Asian countries saw positive growth in imports of China's steel products; while Europe, America and India saw marked negative growth, due to anti-dumping policies against China-origin steel products in these regions.

China steel exports in 2016 (by country)

Rebar price trend in global market

Global long steel market news briefing before Spring Festival

√In South Korea, rebar prices fluctuated upward affected by China’s strengthening trend.
√In Jordan, steel demand shrank severely due to local government’s slash on construction projects, but the price decline may be a modest one, since billet prices are likely to stay solid.
√In Algeria, steel prices moved upward as local government raised value-added tax by 2 percentage points.
√In Indonesia, rebar prices displayed notable rise in Mid-to-late December, 2016, strengthened by upbeat billet price in China.
√In Malaysia, steel prices hovered at high level owning to spike of raw material prices, low inventory and sharp depreciation of foreign exchange rate.
√In Turkey, steel market softened, as the severe depreciation of local currency against USD boosted cost of raw material imports, and in the mean time steel demand remained dim.

Rebar price trend in global market

HRC price trend in global market

Global flat steel market news briefing before Spring Festival

√In Pakistan, HRC prices were consolidated by the batch of infrastructure construction projects brought by the China-Pakistan Economic Corridor.
√In South Korea, HRC prices spiked after POSCO and Hyundai Steel lifted their ex-works prices by around $100/tonne on January 2, 2017.
√In Italy, HRC prices recovered from the lackluster during Christmas holiday.
√In India, steel market edged upward driven by the startup of large-scale infrastructure construction projects and the housing program for low-income residents.
√In Europe, steelmakers in Turkey received surging orders, even with the delivery date extending to March, 2017, due to EU’s antidumping measures to China-made products.
√In Indonesia, steel prices may continue to go upward in short run benefiting from the import policy adjustment.

HRC price trend in global market

China's steel export price quotes offered during

Although steel prices maintained losing trend recently, major steel products could still manage to bring in lucrative gains from domestic sales, which also led to shrinking exports, especially in the second half year in 2016. China’s steel exports prices are seen to make corrections before China’s Spring Festival, as it was lately reported that exporters were engaged with ample orders for the coming 2-4 months. Steel products originating from other countries may show stronger competitiveness over their rivals made in China.

TOP 10 buyers of Chinese steel in Jan-Aug 2016
Influencing factor: Steel demand
  • Real estate

    Real estate

  • Automotive industry

    Automotive industry

  • Shipbuilding Industry

    Shipbuilding Industry

  • Construction machinery

    Construction machinery

  • Light industrial appliances

    Light industrial appliances

Steel price trend survey for post-festival market
Steel price trend survey for post-festival market

  “Capacity cut” will continue to be the theme for domestic supply side reform in 2017, and during the process steel industrial merger and acquisitions and technical optimization and innovation will be inevitable. Production suspension for sake of environmental protection will ascend to the focus among all public affairs. In 2017, the questions below are worthy of thorough contemplation: whether coal and coke market will duplicate the soaring trend taking place in 2016; whether iron ore market will be backed up solidly by outstanding performance of high-grade materials; whether induction furnaces will be completely wiped out by Beijing; whether capacity utilization rate of blast furnaces will come up to compensate the supply dent from induction furnace mills; and to what extent will the shrinking export weigh on domestic market. China’s steel industry will undergo substantial reforms in 2017, and steel prices will fluctuate along with changes of fundamentals and industrial policy.