Chinese steel inventories are declining fast

businessinsider.com.au General,  Steel Products 2018-05-10 15:36:00

Chinese steel inventories are now falling quickly after hitting a multi-year high earlier this year.

 

The dramatic turnaround can be seen in the chart below from ANZ Bank, showing inventory levels this year compared to 2017 as well as the range over the past five years.




Having led to a sharp pullback in steel and bulk commodity prices earlier this year, fanned by fears that Chinese steel demand may be softer-than-expected during the Spring construction season, Daniel Hynes and Soni Kumari, Commodity Strategists at ANZ Bank, said the sharp reduction in inventories has helped to boost both sentiment and prices over the past month or so.

 

"Steel prices recovered strongly in April. Part of this has been a fall in inventories," the pair wrote in a note on May 10.

 

"Strong domestic demand reversed the build-up seen earlier this year. Total steel stockpiles hit a four-year high of 19 million tonnes in March but they have fallen 30% since.

 

"This should ease concerns that the seasonal restocking phase ahead of the peak demand period was going to be subdued."

 

And with steel prices recovering as inputs such as iron ore and coking coal decline, it's seen Chinese steel mill profit margins increase back towards the highs seen late last year.

 

Given the combination of falling inventories and high profit margins, it begs the question whether that could prompt steel mills to lift production, leading to increased demand for raw materials.




Hynes and Kumari suggest it might.

 

"We see iron ore prices finding a floor at current price levels and rebounding to $68/t in the second half of 2018," they say.

 

The price for benchmark 62% iron ore fines currently sits at $66.46/t, according to Metal Bulletin.

(Writing by Alex Guo  Editing by Tammy Yang)
For any questions, please contact us by inqury@fwenergy.com or +86-351-7219322.

Share this article
Connect with us

Editors Recommendations

1 Weekly global coal market news summary (Jan 14 – Jan 18) 2019-01-18

India's ECL output at 33 mln T during Apr-Dec FY2018-19 Eastern Coalfields Ltd (ECL), a subsidiary of Coal India, said on January 17 it produced 32.9 million tonnes of coal in the first thre

2 China on track to cut steel asset-liability ratio to below 60% 2019-01-18

China is on track to further reduce the asset-liability ratio in its steel industry, which stood at 65.74% as of end-November last year, according to an industry meeting held on January 14.

3 China Coal Daily Track (Jan 18) 2019-01-18

Thermal coal Domestic market Production area More mines in Yulin city of Shaanxi were ordered to halt production for safety checks, and most mines were mainly selling stocks. Miners frequ

4 Thoughts about Chinese Shenmu coal accident 2019-01-18

One deadly coal mine accident in northwestern China's Shaanxi province on January 12, which took away 21 lives, has shocked the entire market. Beyond sorrow and regret, there are many aspects we sh

5 Traders divided on China's pre-holiday thermal coal market 2019-01-18

Participants in Chinese spot thermal coal market were divided in the short-term outlook before the Spring Festival holiday, with some holding back on sales anticipating strong pickups while the others

6 Market hype helps push up Indonesian coal prices, traders 2019-01-18

Indonesian coal prices have risen visibly in recent days, and some Chinese traders deemed it unreasonable, in spite of multiple positive factors including heavy rain that has affected local production

7 China Dec power coal price index overview 2019-01-18

China's monthly-issued price index of power coal staged a year-on-year decline of 2.61% in the last month of 2018, which was still 0.41% higher compared with the November level, showed data from the s

8 China 2018 solar curtailment rate declines to 3%, NEA 2019-01-17

China's solar power electricity could be 97% utilized in 2018, and only 3% of the total generation was idled, showed data from the National Energy Administration, down 2.8 percentage points from a yea

9 China Coal Daily Track (Jan 17) 2019-01-17

Thermal coal Domestic market Production area Thermal coal prices continued rising at major production areas. A large numbers of coal mines in Shenmu and Fugu of Shaanxi halted produc

10 CHN Energy lowers spot coal prices by 1-11 yuan/t, sources 2019-01-17

China Energy Investment Corporation (CHN Energy), the nation's top coal miner, reduced its spot prices of thermal coal for the week ending January 21 by 1-11 yuan/t, a pullback from price hikes in the

Most Read Articles

1 China's spot thermal coal prices may head down as port demand drops 2019-01-09

China's spot thermal coal prices might head down in a short term as the downward spiral of port transaction and sagging demand from end users unleashed bearish sentiments among traders for future mark

2 Mongolia's coal exports hit all-time high in 2018 2019-01-07

Mongolia's coal exports hit an all-time high in 2018, the country's finance ministry said on January 4. The landlocked Asian country exported a total of 36.5 million tonnes of coal in 201

3 Chinese thermal coal lacks strength to keep rising, traders 2019-01-08

Chinese thermal coal prices may lack sustained momentum to go up further, traders said, although cargoes settled and offered at northern ports continued edging up on January 7. This was m

4 Newcastle coal price to decline 30% by 2020 2019-01-08

Asia-Pacific benchmark Newcastle coal prices could decline by around 30% by 2020, from 2018 average levels, as Chinese import demand cools, an Australian government report said. The Newca

5 China's import thermal coal market may cool down, traders 2019-01-10

China's import thermal coal market is likely to cool down after utilities finish their buyings, yet prices may not fluctuate sharply, trade sources said. Some Chinese utilities have issue

6 China spot thermal coal market ends 10-day price rebound 2019-01-10

There are some odds that recent price rebound of thermal coal starting late December may come to end at northern China's Bohai-rim ports, as traders scrambled to sell amid weakening demand before the

7 S. Africa Nov thermal coal exports hit one-yr high 2019-01-07

South Africa's thermal coal exports reached 7.92 million tonnes in November, hitting a new high since November last year, showed customs data. The November tonnage was basically unchanged

8 Wide price drops hit China's coking coal market 2019-01-07

China's coking coal market was hit by widespread price drops in the past week, as prices of raw coking coal declined with the decrease of washed products in main-producing bases, under the bleak outlo

9 China coastal thermal coal market struggles again after brief bounce 2019-01-11

China's coastal thermal coal market lost strength after over one-week rebound, and the rate of decline seemed speeding up along with dwindling demand. On January 10, the Fenwei CCI index

10 Chinese thermal coal extends weakness as traders rush to dump cargoes 2019-01-11

Chinese thermal coal prices continued losing ground at northern transfer ports, partly due to some traders' de-stocking activities aimed to shun costly storage fees and financial expenses.

Scan to download sxcoal.com mobile APP

X