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Supply Pressure Eases, Steel Prices Surge in July

2013-07-29 690 0人评论
     Since July, domestic steel prices have surged, posting their largest monthly gain since September last year. As of July 26, the steel index closed at 3,660 yuan/ton, up 270 yuan/ton from the end of last month, a monthly increase of 7.96%. Slower release of crude steel capacity, terminal demand that remained firm despite the off-season, sharp rises in raw material prices, and an improved export situation were the main factors driving the July steel price increase.
　　On the supply side, national average daily crude steel output fell 1.2% and 0.33% month-on-month in May and June, respectively, declining slightly for two consecutive months. According to China Iron and Steel Association data for early July, national average daily crude steel output plunged 4.5% month-on-month, far exceeding market expectations. Inventory data showed that as of July 19, total inventories of the five major steel products across 35 major markets nationwide stood at 15.6053 million tons, down for 18 consecutive weeks, with specification shortages occurring from time to time in many markets. The easing of supply pressure was an important reason for the July steel price increase.
　　Finally, on the cost side, import iron ore prices rose rapidly this month, with a monthly gain of 13.12%, while billet and scrap steel rose 6.1% and 7.89%, respectively.
　　Affected by intensified environmental protection efforts and improved exports, domestic steel mills have recently reduced the volume of resources supplied to the market. Meanwhile, driven by the successive introduction of the country's pro-growth policies, domestic market demand is gradually improving. The improvement in the supply-demand environment provides strong support for steel price trends, and domestic steel prices are expected to trend upward with fluctuations in August. However, as steelmakers' profitability improves, they will have a strong incentive to increase output, while the domestic economy is clearly slowing. The fundamentals of the domestic steel market remain generally weak overall, and the market may still experience repeated fluctuations.
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