China's persistent rains dent steel product sales and weigh on prices

sxcoal.com Price 2020-07-16 13:43:10

Persistent rainfalls in South China were primarily blamed for subduing sales of steel products, which kept weighing on steel prices in recent days.


A clear reflection is relatively high steel stocks even when steelmakers have actually witnessed a small fall in production.


Data from China Iron and Steel Association (CISA) showed key steel mills' inventory inched up 0.01% from ten days ago and up 42.84% from early this year to 13.62 million tonnes as of July 10, despite a 0.53% fall in daily crude steel output to 2.13 million tonnes over July 1-10.


In early July, many provinces in China issued rainstorm alerts, especially Sichuan, Guizhou and Chongqing and areas along the middle and downstream of Yangtze River.


Since mid-July, the rain belt in East China moved to mainly North and Northeast regions, which means northern China will see stronger and more concentrated rains and reservoirs will face great challenges.


The unabated rainfalls are likely to interrupt sales of steel products in the short run. The CISA data showed total finished steel stocks in China were 12.48 million tonnes as of July 10, rising 2.7% from ten days ago and surging 83.1% from early this year. The inventory is expected to further increase amid rainy season.


According to the data, southwestern China reported the sharpest increase of 8.7% in finished steel stocks during July 1-10, while stocks in northeastern region fell 12.0%.


So for most steelmakers in northern China, their stockpiles didn't fluctuate greatly, meaning domestic steel demand remained relatively good, but was temporarily dented by unfavorable weather.


Cement market also showed similar situation. Monitoring data showed cement prices in Anhui, Jiangsu, Zhejiang and Shanghai all declined by 30 yuan/t, while prices in Jilin and Xinxiang of Zhengzhou rose by 30 yuan/t and 10-20 yuan/t, respectively.


Alongside construction of new infrastructure projects, China's steel demand will likely bounce back in the second half of this year, and steel market could also turn around after the rainy season ends.


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

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